Auditors Get Audited Too!
by Corey Arvizu, CPA, Managing Partner
Posted on August 23, 2018
It is a familiar occurrence each year when your organization’s audit team arrives for the on-site visit. The on-site audit can be stressful for both you and your staff as the auditors begin to look through your records, ask questions about processes, and, worst of all, present potential audit findings at the end of the audit. But did you know your auditors get audited too?
Both Government Auditing Standards and State rules require audit firms obtain a peer review by another independent accounting firm every three years. Similar to our review of your internal controls, the peer review team looks at the firm’s system of quality control. The system review includes our process for accepting clients, our commitment to training and evaluating staff, checking the use of our practice aids and reference materials, reviewing our independence documentation, and ensuring there is a proper “tone at the top” message to the employees regarding audit quality.
In addition to reviewing our system controls the peer review includes an examination of our audit documentation. Similar to our samples of transactions for your audit, the peer review team samples audits completed by the firm. The items looked at during this part of the review includes our planning documentation, specific audit procedures performed for accounts, and the audit reports issued. The peer review also includes an exit conference, very similar to your audit exit conference, in which the peer review team provides recommendations for improvements.
Other “audits” of audit firms also include reviews by both Federal and state oversight agencies. Most state auditors perform either a pre-issuance or post-issuance reviews of financial statements. In some cases all reports issued are reviewed; in other cases, reviews are conducted on a sample of reports. State auditors will also review working papers of audit firms, in some cases annually, in others on a rotation basis. Federal agencies such as the Department of Education or Department of Housing and Urban Development also perform reviews of financial statements and working papers. Typically these reviews are focused on the Federal program of the agency but they are often very in depth using a detailed “audit checklist.”
Lastly, even continuing education trainings taken to stay current on auditing and accounting developments are subject to “audits.” Most state licensing agencies that provide the “CPA” designation sample number of individuals each year to review the trainings completed during the year, typically checking for certificates of completion and if the technical content met the state’s requirements.
Although your friendly HeinfeldMeech team does their best to minimize the stress and disruption caused by the audit it may provide you some consolation to you to know that auditors get “audited” too!
