DCAA Audit Guidance - Financial Capability Audits at Parent and Subsidiary Locations
In the light of recent corporate scandals, DCAA has put considerable emphasis on conducting reviews of financial risk assessments and financial capability. A recent guideline addresses these audits when there are parent companies of the segments/subsidiaries performing the contract. The guidance states the audits should generally be performed at the parent company (home office) rather than the segment. There are generally two exceptions to this: (1) DCAA does not have access to the parent company or (2) the parent company does not guarantee the subsidiary’s performance and the parent company does not obtain the subsidiary’s cash (commonly referred to as “cash sweeps”) (MRD 05-PPD-057(R).
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