The Defense Contract Audit Agency issued guidance indicating prior opinions on the adequacy of contractors’ accounting systems may need to be revised.  Specifically:

1.  Opinion that a contractor’s accounting system was adequate based on proposed but not yet completed corrections of “significant internal control deficiency.”  Prior guidance before January 31, 2001 permitted auditors to opine that a contractor’s accounting system was adequate when a contractor proposed but had not competed correction of a significant internal control deficiency.  After that date, the DCAA guidance changed, requiring auditors to opine that the accounting system was either “inadequate” or “inadequate in part” until they could verify the contractor’s action was completed and in fact corrected the deficiencies.

2.  Opinion the non-major contractors’ accounting and billing controls were adequate after following DCAA’s accounting and billing system audit program.  Reviews of DCAA’s work found that after completing a cursory “Preaward Accounting System Survey” usually conducted at small and mid-sized contractors DCAA erroneously issued an audit report using a pro-forma or boilerplate audit report (called report shell) purporting to express an opinion on the results of a full-scale accounting and billing internal control audit usually reserved for large contractors.

In response to this disconnect of audit effort and audit report, DCAA issued a new audit program intended to evaluate non-majors’ accounting and billing system along with a new shell report expressing an opinion.  (Editor’s Note.  Since this new audit program is intended to identify audit steps DCAA will take in evaluating most contractors, we intend to discuss it in some depth in an upcoming issue of the GCA DIGEST.)

3.  Failure to complete MMAS audits every 2 to 4 years at major contractors.   Opinions based on prior management and accounting systems reviews at major contractors completed longer that 4 years ago are not to be relied upon (MRD-02-PQA-077(R).

{TAG_FORM_TITLE}

To discuss your needs, contact Bill Lennett, Principal, at 1-925-362-0712 or email him at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

First Name:

*

 

Last Name:

*

 

Email:

*

 

Phone:

 

Short Description of Interests and Needs:

*