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A question often asked by auditees is "Who's auditing the auditors?" Budget officials in Independence Missouri were reluctant to support a requested budget amount for peer review expenses. They called it an unnecessary expense during a period of austerity. However, when the City Auditor pointed out that the peer review team would audit his compliance with government auditing standards and issue a report including recommendations for improvement, all opposition immediately vanished.
As December 1991 approached, the City Auditor and his assistant became more and more uneasy about the impending peer review. Could a two-person audit shop comply with audit standards? Would the peer review team find significant or even substantial deviations from accepted standards? Why did the City Auditor insist on including peer review requirements within the revised ordinance for his office? If peer review results were negative, would the auditors lose credibility or even their jobs? What seemed like a good idea at first now became dreaded. The City Auditor even considered delaying the peer review. However, he believes that following audit standards is necessary to ensure high quality and independent audits. Therefore, the peer review was arranged in late 1991.
The peer review was to be conducted using the ALGA Quality Control Review Guide. After completing the "Quality Control System Description" section, the City Auditor became more confident that his organization was generally in compliance with Government Audit Standards. This exercise also identified areas where quality control could be strengthened. Using the ALGA guide to perform a self-assessment reduced uncertainty about peer review results.
The peer review team consisted of three members who spent three days on-site. They verified audit procedures, quality control systems, and reviewed workpapers for several audits. When the peer review was completed we felt like auditees, especially after discussing exceptions. We found that the peer review team was very capable and fair in their assessment of audit quality control. We are pleased with the report and management letter. We received an unqualified opinion and five recommendations were included in the management letter. In our opinion, none of the recommendations were indicative of any material problem, but all were useful for improving audit quality.
In conclusion, Governmental Audit Standards are sufficiently broad to allow compliance by smaller audit groups. The peer review process can be effectively applied to smaller audit shops with positive results and can help improve operations.
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Peer Review