Enhancing Public Confidence: The GAO’s Peer Review Experience

n 2004 we at the
Government Accountability Office (GAO) arranged to
have a multinational team of experienced
performance auditors conduct the first-ever peer
review of our performance audits of federal
government programs (
www.gao.gov/peerreviewrpt2005.pdf
). We also
hired KPMG LLP to conduct a peer review of our
financial audit practice—their fourth such
engagement with us. Both audit teams concluded
that during the period reviewed the GAO’s quality
assurance system was suitably designed and
operating effectively to provide reasonable
assurance of conforming to applicable professional
standards. The international peer review team also
said that other national audit offices may want to
emulate several of our practices and made
suggestions that further enhanced our practice and
provided other significant benefits. According to
the reviewers, “[the] quality assurance system
reinforces the GAO’s independence, objectivity and
reliability.” These reviews inform Congress of and
give the American people confidence in the quality
of our financial and performance audits.

UNDER THE MICROSCOPE
A team of 16
experienced performance auditors from seven
countries reviewed our performance audit practice.
The Office of the Auditor General of Canada led
the multinational team. Other participants
included national audit offices in Australia,
Mexico, the Netherlands, Norway, South Africa and
Sweden. The KPMG team consisted of experienced
financial audit partners and managers with
extensive government financial auditing
experience.

The review teams focused on
the elements of our quality assurance system
dealing with engagement performance and compliance
monitoring. They reviewed our audit policies and
process controls, examined a representative sample
of our 2004 audit engagement files and reports on
government programs, and interviewed senior
managers and staff responsible for selected
engagements. They also evaluated our internal
inspection program, including a representative
sample of engagement files that our internal
inspectors had examined in 2004 to determine
whether their findings were supportable.

The performance audit team followed government
auditing standards (the Yellow Book) and conducted
the review in a manner consistent with the code of
ethics and standards issued by the International
Organization of Supreme Audit Institutions.

The review team’s ultimate objective was to
determine whether the GAO’s system of quality
controls provided reasonable assurance that our
work is independent, objective and reliable. The
financial audit team followed the applicable AICPA
peer review standards as well as government
auditing standards.

How to Do It Better

The peer reviewers
identified the following as
GAO better practices:

Use strategic
planning to focus on and
respond to significant issues
and management challenges.

Conduct audit
risk assessments to identify
risk levels and determine the
appropriate level of product
review and management
involvement.

Establish agency
protocols (see
www.gao.gov
) that
explain what agencies can
expect from the GAO during the
audit and what the GAO expects
from them.

Use experts to
conduct innovative analysis of
complex situations.

Employ the
Electronic Assistance Guide
for Leading Engagements
(EAGLE) that helps GAO staff
better manage their
engagements by giving them
immediate access to the
policy, procedural and
documentation requirements of
the quality assurance system.

Tailor audit
report designs to the needs of
readers with varied interests.

GOOD MARKS
A key organizational and
operational benefit of the peer review was the
reviewers’ confirmation that some of our key
overarching quality control procedures are global
better practices (see “ How to Do
It Better,
” above). According to their
report, those practices help ensure that we focus
our efforts on factors that affect government
performance, that we assign engagement resources
according to risk, that we develop complete and
reliable evidence, that our engagement teams have
the guidance and diagnostic tools necessary to
perform their work and that our reports are clear,
persuasive and fair.

The reviewers also
said that the GAO could improve its performance
audit practice by, for example, enhancing the
transparency and efficiency of its quality
assurance system and policies. We have implemented
some of these recommendations, and we are testing
others (see “ Dividends
Earned
,” below).

Dividends Earned

The GAO’s peer review

Provides
assurance to Congress and to
the American people that the
GAO’s work is objective,
independent and reliable.

Helps the GAO
meet government auditing
standards.

Provides
assurance to the Comptroller
General and to senior GAO
executives that the GAO is
fulfilling its
responsibilities and complying
with requirements.

Demonstrates that
the GAO itself is accountable.

Documents the
GAO’s Quality Assurance
Framework.

Enables the GAO’s
staff to learn from others.

Is a source of
pride for GAO staff.

Improves
policies, forms, guidance and
training.

Increases the
staff’s knowledge of
standards, policies, guidance
and better practices.

Enhances the
GAO’s quality control system.

A PLAN FOR EXCELLENCE

The GAO’s approach to quality assurance was
based on applicable professional standards and the
agency’s core values of accountability,
reliability and integrity and it ends with public
dissemination of virtually all its products. We
had already created a quality assurance framework
(see the exhibit below) to
summarize the policies and procedures we use to
ensure compliance with professional standards and
our core values. It applies to both performance
and financial audits. The framework focuses on
staff, processes and technology. It addresses
leadership, human capital, engagement performance,
monitoring and policy review by defining the roles
and responsibilities of key participants, key
control objectives and relevant procedures, and by
providing links to online references. At the
framework’s core is a standardized, decision-based
engagement management process that ensures
consistency in the application of key controls.
The framework also includes monitoring and
assessment by both internal and external entities,
and mechanisms for continuous improvement.

THE KEY TO QUALITY CONTROL

The GAO has long had a rigorous internal
quality control program that annually reviewed a
sample of work from every part of the agency for
compliance with policies and procedures. These
reviews evolved into our current inspection
program, which the peer reviewers recognized as a
comprehensive, effective assessment. The
development of this rigorous inspection program
took several years, but its results have helped
enhance training, reform policies and improve
audit tools. We also had improved our methodology
for conducting the inspection by designing
checklists and other tools to facilitate it and
had developed a staff with the expertise to
conduct inspections.

IDEAS FOR IMPROVEMENT

The peer reviewers also made the following
suggestions:

Distinguish between audit and
non-audit services. Provide additional guidance on
what kind and extent of evidence is appropriate
for each form of service, and explain when it is
appropriate to consider changing an audit
determination in view of newly obtained evidence.

Provide additional details on the
sources of critical audit-related information and
the implications of choosing a particular audit
scope and methodology.

Review the quality assurance system
to see whether we can improve it.

Streamline the audit documentation
requirements.

Increase the efficiency of the
inspection program.

CPE

“Peer Review:
Are You Ready?” (text, #
731692JA).


JofA

Article



Peer Review Is Stronger and
Better Now,
JofA
, Apr.05, page 44.

Online Center


Center for
Public Company Audit Firms
Peer Review Program,
www.aicpa.org/centerprp/peer_review.htm
.

Publication

AICPA Peer Review Program
Manual
(loose-leaf
subscription, # QR-XXJA).

For more information or to
place an order, go to
www.cpa2biz.com
or call
888-777-7077.

IT WORKS FOR US

Although peer review is a lengthy and costly
process, it enables us to better inform
stakeholders of our activities and their results.
For example, in accordance with government
auditing standards we share the peer review
reports with our oversight committee. We also make
them available to the public on our Web site (
www.gao.gov/aac.html
) and refer to them in
our annual performance and accountability report
and testimony to Congress.

GAO’s Quality
Assurance Framework for
Ensuring Compliance With

Generally Accepted
Government Auditing
Standards (GAGAS)

In addition to promoting the public interest,
peer review helps an audit organization understand
whether its practices comply with professional
standards and how they compare with those of other
entities and with new practices. For us, the chief
benefit was confirmation of our compliance with
government auditing standards. As an organization
in constant pursuit of improvement, we also
benefited from the peer reviewers’ recognition of
our quality control procedures as global better
practices as well as their suggestions on how to
strengthen guidance and streamline procedures.
These positive results have more than repaid the
time, money and effort we’ve put into peer review.


David M. Walker, CPA,

is comptroller general of the United States
and heads the U.S. Government Accountability
Office.

Research & References of Enhancing Public Confidence: The GAO’s Peer Review Experience|A&C Accounting And Tax Services
Source

79 thoughts on “Enhancing Public Confidence: The GAO’s Peer Review Experience”


Leave a Reply