Material Management and Accounting System Audit

Scope

Evaluates material purchasing, receiving, storage, issuance, and accounting procedures. Reviews inventory accuracy, material cost accumulation by contract, excess and residual material disposition, and integration between the material system and the accounting/billing systems. Tests material transactions for proper charging and documentation.

Frequency

Typically reviewed every 3-5 years for contractors with significant material content in their government contracts. More frequent reviews if material-related deficiencies are identified during other audits or if the contractor's material management practices change significantly.

What to Expect

Auditors review material management policies, test a sample of material transactions from purchase through issuance, verify inventory accuracy through physical counts, and evaluate internal controls. The audit results in a determination of system adequacy. Significant deficiencies may trigger a 5% withhold on billings and require corrective action.

Key Documents

• DFARS 252.242-7004 — Material Management and Accounting System
• Material management policies and procedures
• Inventory records and physical count results
• Material requisition and issuance documentation
• Excess and residual material disposition records

Other post-award Audits

Other DCAA Audit Types