The Take That singer had curated the Queen's Diamond Jubilee concert, which took place the previous day in London. He also collaborated with musicians including Andrew Lloyd Webber, Gareth Malone, the Military Wives Choir and the Commonwealth Band on a specially-commissioned work titled 'Sing'.
The crowd at the auditions are said to have responded positively to Walsh's quip, with some cheering and others shouting "Get Gary knighted!"
'Rule Britannia' was also played during the afternoon session, with members of the audience saluting Barlow.
Of Monday's concert, Barlow said: "It was an amazing day - hopefully for the audiences at home watching and everyone there. Not only were the acts having a great time front of stage, the whole of the backstage area were having a good time as well... It was an amazing day for our country yesterday."
Barlow - who has previously been quoted as saying that he thinks he is too young to receive a knighthood - also commented on Grace Jones's hula hoop routine during her performance of 'Slave to the Rhythm'.
"I thought, 'Why was she wearing a hula hoop, and more to the point, what was she going to do with it?' I thought it was absolute genius that she sung the whole song with it on," he added.
Auditions for The X Factor continue at EventCity in Manchester today and tomorrow (June 6 and 7), with Mel B as guest judge.