IN RESPONSE TO INCREASED DEMANDS FOR IMPROVED AUDITS OF FEDERALLY ASSISTED PROGRAMS OF STATE AND LOCAL GOVERNMENTS, THE MIDWESTERN INTERGOVERNMENTAL AUDIT FORUM SPONSORED A PEER REVIEW PROJECT IN 1978, TO COMBAT PROBLEMS OF AUDIT DUPLICATION AND INEFFECTIVE USE OF RESOURCES. AFTER GUIDELINES WERE DEVELOPED AND MEMBER AGENCIES VOLUNTEERED PERSONNEL, A COMMITTEE WAS CREATED WITH THE AUTHORITY TO CONDUCT THREE TEST REVIEWS OF AUDIT AGENCIES. IT PREPARED EVALUATION INSTRUMENTS AND SELECTED MEMBERS FROM AUDIT AGENCIES TO SERVE ON REVIEW TEAMS. WHEN THE TEAMS COMPLETED THEIR ASSESSMENT, THEY WROTE A REPORT FOR THE AGENCY'S AUDIT SUPERVISOR WHICH CONTAINED CONSTRUCTIVE SUGGESTIONS TO IMPROVE POLICIES AND PRACTICES. USING THE TEST REVIEWS, THE COMMITTEE AMENDED THEIR EVALUATION STANDARDS AND DESIGNED A SCORING SYSTEM FOR THE REVIEW TEAM TO RATE GRADATIONS OF COMPLIANCE TO STANDARDS AND ASSESS OVERALL CONFORMANCE. AN AUDIT GUIDE PRESENTS 52 EVALUATION STANDARDS APPLICABLE TO FEDERAL, STATE AND LOCAL AUDIT AGENCIES AND EXPLAINS THE GRADING AND SCORING SYSTEM USED TO EVALUATE CONFORMANCE WITH THESE STANDARDS. APPLICANTS FOR REVIEW TEAMS ARE SELECTED ON THE BASIS OF ANSWERS TO QUESTIONNAIRES CONCERNING THEIR WORK EXPERIENCE AND EDUCATION. PRIOR TO THE REVIEW, QUESTIONNAIRES ARE ALSO COMPLETED BY THE AGENCY REQUESTING A REVIEW, ITS AUDITING STAFF, THE AUDITEES, AND USERS OF THE AUDIT REPORTS. WORKSHEET AND FINAL REPORT FORMS ASSIST THE TEAM IN DEVELOPING CONCLUSIONS CONCERNING AN AUDIT AGENCY'S COMPLIANCE AND GENERAL PERFORMANCE. THE SYSTEM CAN BE USED IN ITS ENTIRETY, AS A SUPPLEMENT TO AN EVALUATION, OR AS A SELF-IMPROVEMENT GUIDE. THE BYLAWS OF THE MIDWESTERN INTERGOVERNMENTAL AUDIT FORUM ARE INCLUDED ALONG WITH COPIES OF THE REVIEW INSTRUMENTS AND SAMPLE LETTERS USED IN THE PROJECT. (MJM)