Professional Services Council February 25, 2009 April G. Stephenson Director

2 Directors Philosophy Quality audits must not be sacrificed for any reason Continuous Process Improvement Efficient & effective accomplishment of DCAA mission Audits to ensure that the Government pays a fair and reasonable price for goods and services Back to Basics Need to understand what you are auditing Face-to-face communication with the contractor employees Ask questions, maintain auditor skepticism Develop sound conclusions

3 DCAA Initiatives/Current Issues Audit Guidance on Denial of Access to Records Due to Contractor Delays Audit Guidance on Significant Deficiencies/ Material Weaknesses and Audit Opinions on Internal Control Systems Audit Guidance on Limited Scope Audit Reports on Internal Controls

4 Audit Guidance on Denial of Access to Records Due to Contractor Delays MRD 08-PAS-042(R), dated December 19, 2008 Reason for guidance memo - remind auditors of expectations for access to contractor records and personnel Expectations Quality and effective audits require timely access to records. Documentation supporting the contractors assertion should be readily available and provided upon request. Address some contractors use of slow roll response to data.

5 Audit Guidance on Denial of Access to Records Due to Contractor Delays MRD 08-PAS-042(R), dated December 19, 2008 Expectations (cont.) Supporting documentation includes access to personnel. Auditors should generally obtain support directly from the person responsible for the information. If Denial of Access to Records Elevate issue in writing to higher level management – if not resolved. Suspension or withhold costs and question the unsupported costs in the audit report, as appropriate. If still not resolved, elevate to HQs for pursuing a subpoena.

6 Audit Guidance on Audit Opinions on Internal Control Systems MRD 08-PAS-043(R), dated December 19, 2008 Reason for change in guidance – Ensure significant deficiency in contractor system is identified and addressed/corrected in a timely manner Eliminate confusion on inadequate-in-part opinion and suggestions for improvement Expectations Audits of contractor internal controls are only performed at large contractors where deficiencies are significant Clarify that a deficiency is a deficiency – no reason for inadequate-in-part opinion under the FAR or GAGAS

7 Audit Guidance on Limited Scope Audit Reports on Internal Controls MRD 08-PAS-041(R), dated December 19, 2008 Reason for change in guidance – significant deficiencies identified in other than internal control audits could take several years to report depending on the audit cycle Results in more expeditious reporting of deficiencies Results in more timely correction by contractors Expectations Issue a flash report when condition found (no change); Establish separate limited scope audit to review control activities related to the control objective; and If control activities audited are not adequate to assure control objectives are accomplished, report the system as inadequate.

8 More Information on DCAA DCAA Audit Guidance Memorandums and Contract Audit Manual (CAM) are available on DCAAs web site at: Questions?