Accounting System Adequacy Audit

Scope

Evaluates the accounting system against specific criteria including: proper segregation of direct and indirect costs, identification of unallowable costs, accumulation of costs by contract, compliance with CAS and FAR cost principles, timely recording of costs, and adequate internal controls. Reviews the system's ability to generate accurate cost data for billing and reporting.

Frequency

Required before award of first cost-type DoD contract. Subsequent reviews conducted when significant changes to the accounting system occur, when deficiencies are identified during other audits, or on a risk-based cycle (typically every 3-5 years for established contractors).

What to Expect

Auditors perform detailed testing of the accounting system including transaction testing, walk-throughs of cost flows, review of chart of accounts, and evaluation of internal controls. The audit results in a determination of "adequate" or "inadequate" with specific deficiencies identified. Contractors with inadequate systems may receive a corrective action plan and follow-up audit.

Key Documents

• SF 1408 — Pre-Award Survey of Prospective Contractor (Accounting System)
• DFARS 252.242-7006 — Accounting System Administration
• Chart of accounts and accounting policies manual
• System flow diagrams and process narratives
• Sample invoices, timesheets, and cost reports

Other pre-award Audits

Other DCAA Audit Types