Government Auditing Standards

For 2011, the United States Government Accountability Office (GAO) clarified several of its positions on Quality Control and Assurance Reviews, commonly referred to as Peer Reviews, for organizations conducting external audits on government entities. Audit organizations conducting external audits on government entities are required to obtain an external peer review at least once every three (3) years as it provides a reasonable basis for determining whether, for the period under review, the reviewed audit organization’s system of quality control was suitably designed and whether the audit organization is in compliance with its own internal quality control system. In doing so, the peer review team may assess and provide assurance that the organizational performing external services for government entities and its personnel complied with professional standards as well as applicable legal and regulatory requirements.

During the assessment, the peer review team will:

  • review of the audit organization’s quality control policies and procedures;
  • consideration of the adequacy and results of the audit organization’s internal monitoring procedures;
  • review of selected auditors’ reports and related documentation;
  • review of other documents necessary for assessing compliance with standards, for example, independence documentation, CPE records, and relevant human resource
    management files; and
  • interview a selection professional staff at various levels to assess their understanding of and compliance with relevant quality control policies and procedures.

The peer review team is required to prepare one or more written reports communicating the results of the peer review, including the following:

  • description of the scope of the peer review, including any limitations;
  • opinion on whether the system of quality control of the reviewed audit organization’s audit practices was adequately designed and complied with during the period reviewed to provide the audit organization with reasonable assurance of conforming with applicable professional standards; and
  • specification of the professional standards to which the reviewed audit organization is being held.
  • The following is a description of the possible Peer Review opinions:
  • Peer Review Rating of Pass: conclusion that the audit organization’s system of quality control has been suitably designed and complied with to provide the audit organization with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects.
  • Peer Review Rating of Pass with Deficiencies: conclusion that the audit organization’s system of quality control has been suitably designed and complied with to provide the audit organization with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects with the exception of a certain deficiency or deficiencies that are described in the report.
  • Peer Review Rating of Fail: conclusion, based on the significant deficiencies that are described in the report, that the audit organization’s system of quality control is not suitably designed to provide the audit organization with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects, or the audit organization has not complied with its system of quality control to provide the audit organization with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects.

Therefore, audit organizations seeking to enter into a contract to perform an audit in accordance with Government Auditing Standards should provide to its clients (and further, should be requested by clients): the audit organization’s most recent peer review report, and any subsequent peer review reports received during the period of the contract.