Get ready for your next peer review with this audit peer review checklist.
What is an audit peer review?
Who audits the auditor? A peer reviewer does!
An auditor’s job is to express an opinion on whether the audit subject matter meets a given criteria.
A peer reviewer’s job is to express an opinion on whether the auditor is following audit standards.
Why are they called a peer?
The peer reviewer is called a ‘peer’ because ideally they are auditors who are also in the arena trying to follow auditing standards themselves.
And you don’t want an auditor from a 100 person audit shop to be the peer reviewer of an audit shop of 3 people because the peer reviewer won’t have empathy for the constraints experienced by a 3 person audit shop!
So the best peer reviewer comes from an audit shop that is a similar size and has a similar mission and follows the same audit standards.
This audit peer review checklist is focused on Yellow Book Auditing Standards
Although most audit standards have similar guidelines for peer reviews, we are going to focus on the GAO Yellow Book standards here.
If an audit shop follows the Yellow Book, they are required to undergo a peer review every three years.
The major things the peer reviewer is looking for
- Do you have a policy and procedures manual? Does the content of the manual align with Yellow Book standards? Does the audit team have access to the manual?
- Is your audit team independent of the auditee and audit subject matter? Does the audit shop have a process in place to continually assess independence of the auditor and the audit team?
- Is the audit team competent to perform audits? Have the auditors met their continuing education requirements?
- Does the audit shop have a system in place to ensure compliance with standards on each audit? Is this quality control system reviewed and tweaked annually?
- Does audit documentation comply with standards? Did the auditor address risk, controls, IT, fraud, and compliance as required by standards? Did the auditor gather sufficient, appropriate evidence to back up their findings and conclusions?
- Do the audit reports comply with standards? Do the reports include the required language and content? Are all statements backed up with sufficient, appropriate evidence? Did the auditee get a chance to respond to the auditor’s findings?
Peer reviewers don’t look at everything!
Yes! There is a lot more for a peer reviewer to look at. But the main goal of a peer reviewer is to make sure that the audit shop has controls in place to ensure compliance with standards.
The main goal of a peer reviewer is NOT to pore over every set of audit documentation and audit report and make sure that every t was crossed.
That would take forever and doesn’t correspond to the way auditors do their work! Auditors sample and usually (but not always) evaluate controls to make sure that the auditee will continue to meet the criteria in the future.
In the same way, the peer reviewer only evaluates a small sample of the output of the audit shop and concentrates their efforts on the controls (known as the quality control system) the audit shop has in place.
Every granular detail for your audit peer review checklist
We made a downloadable list of all of the ‘must and should’ statements in the 2021 version of the Yellow Book. The peer reviewer can use this list to evaluate the audit documentation and audit reports that they sample.
But, more importantly, the peer reviewer wants to see that the audit organization applies these must and should statements to their own audits before they issue the audit report.
Where to get more information
The GAO did something unusual in 2018 – they specifically mentioned and approved the peer review programs of the following entities.
In other words, if you follow these entity’s programs, you will be in compliance with the GAO’s Yellow Book standards. Warning! Some of these entities restrict access to their checklists to members only.
I recommend that to prepare for a peer review, you use one of these programs to evaluate your audit shop. Or you can use this downloadable ‘must and should’ checklist. Both will help you be more confident that you are ready for a peer review.
Where to learn more
The 2018 GAO Yellow Book Interpreted
Yellow Book Standards for Performance Auditors Bundle
Yellow Book Standards for Financial Auditors Bundle