DCAA Audit redstone government consulting

One of the primary goals for a contractor notified of an impending Defense Contract Audit Agency (DCAA) audit should be to understand the audit process and, if possible, to develop a positive working relationship with auditors.  In other words, to work with rather than against the auditor.

Understanding DCAA auditing concepts and philosophies is important to understanding how to prepare for its audits.  DCAA abides by GAGAS (Generally Accepted Government Auditing Standards) which are established by the GAO, the government’s audit standard establishment body.  It will perform its audits using the following regulatory authority, guidance and direction:

  • FAR, DFARS, and other Federal Agency supplements;

  • Various internal DCAA guidance pamphlets including “Information for Contractors”;

  • DCAA CAM (Contract Audit Manual), standard audit programs, & adequacy checklists;

  • DCAA Open Audit Guidance memorandums;

  • DCAA ICES (Incurred Cost Electronic) manual;

  • DCAA training manuals and modules and EZQuant Statistical Sampling Application;

  • DCAA’s public website www.dcaa.mil.

DCAA auditors are trained to follow a fairly general audit process for the vast majority of their audits.  That process includes steps related to audit planning, actually executing the plan, and eventually reporting the results of the completed audit.  When the auditor prepares the plan for a specific audit a risk assessment is performed and approved by a supervisor.  Once the risk assessment is approved then the auditor will prepare an audit program based on a standard set of DCAA audit programs and modified as appropriate to reflect the risk assessment.  The auditor will then execute the audit program by first reviewing applicable policies and procedures for the item under review.  Regardless of whether it is an audit of an individual pricing proposal or internal controls over accounting or management systems or some other typical audit area the auditor will most likely request and review related policies and procedures.  Once the auditor completes the review of policies and procedures then steps are developed and completed to obtain and test sufficient evidential data to either accept or question the item or items under review.   The documentation to support the position is then provided for supervisory and technical review as appropriate.  The culmination of this audit should then be a thoroughly reviewed report setting forth the opinion, questioned costs, exceptions, etc. that in most cases is first provided to the contractor in draft form and should include contractor comments. 

Preparation is the best tool a contractor should use when notified of an audit.  Once notified, identify the audit type or category and research it on DCAA’s website to determine the audit program and guidance that will be used.  Insist upon an entrance conference so that at a minimum you can fully understand audit objectives, establish a line of communication to include points of contact, and determine the expected duration of the audit.  Also, you should ensure that you properly staff the audit so that you can adequately comply with and understand auditor requests.  Proper preparation should eliminate any surprises and allow you to better address any potential issues.  Here at Redstone we help you prepare and can assist you before, during, and after your audits.  Contact us and any of our consultants can provide you with information.


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Written by Wayne Murdock

About Redstone GCI

Redstone GCI is a consulting firm focused on fulfilling the needs of government contractors in all areas of compliance. With a singular mission to help contractors through the multiple layers of “red tape,” we allow contractors to focus on what they do best – support their mission with the U.S. Government. We are home to a group of consultants made up of GovCon industry professionals, CPAs, attorneys, and retired government audit and acquisition professionals.

Our focus and knowledge of audit and compliance functions administered by DCAA and DCMA will always be at the heart of what we do. However, for the past decade, we’ve strategically grown to support other areas of the government contractor back-office with that same level of focus and expertise. We’ve added expertise in contracts management, subcontract administration, proposal pricing, various software systems, HR and employment law, property administration, manufacturing, data analytics/reporting, Grant specialists, M&A, and many other areas. When we see a trend in the needs of contractors, we act to ensure we can provide the best expertise in the market to fulfill those needs.

One thing our clients can be certain of is that with the Redstone GCI Team in your corner, there is no problem too big and no issue too technical for our team to tackle.

Topics: Compliant Accounting Infrastructure, Contracts & Subcontracts Administration, DCAA Audit Support