Allsmiles, are you the loan review department as well as the auditing department? Or just auditing the loan review function? If you are the loan review department and are acting as the only function of loan review, you should refer to the Interagency Policy Statement on the ALLL from December 2006.
http://www.federalreserve.gov/boarddocs/srletters/2006/SR0617a1.pdf Review pages 16-21. This gives great guidance on the scope, frequency and depth of your loan reviews. Overall, the purpose of loan review (as you should already have staff checking for documentation) is credit quality and assessing the adequacy of the ALLL as a loan review officer. We look at documentation, but focus mostly on the quality of the credit, proper collateral, ability to repay, and risk ratings.