To achieve an unqualified audit opinion on the Defense Department’s financial statements, one of the financial reporting issues is correctly assessing the value of property and material in possession by contractors.  Since DCAA has a major presence at contractors, DOD has asked them for their assistance in quantifying the property and material costs.  DCAA has issued a 40-pages guide to its auditors that includes instructions on how to value the property and material.

Specialists within DCAA have been appointed to work with local auditors in conducting the audits.  31 contractor segments have been selected for initial audits.  A sample of one or more contracts will be made to evaluate such items as real property, high dollar plant equipment, other plant equipment, special test equipment, special tooling and material that will be selected on a sample basis.  Detailed guidance is provided on how to select these items and how to ascertain their value based on financial auditing standards.  The guidance includes a detailed audit program to be followed, rules for adequate disclosure and several pro forma letters (00-PPD-044R).

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