This will be of interest to publicly held Government contractors. DCAA recently revised its guidance concerning audit review of indirect cost allocation bases. Auditors are now required to review the applicable portions of SEC filings to determine if off-balance sheet arrangements or related party transactions exist.
If any off-balance sheet arrangements or related party transactions exist and receive benefits of the parent company, or a segment, the auditor must determine that those entities are included in the appropriate allocation bases for an equitable share of indirect costs.
Auditors, of course, have always tested to determine whether the indirect cost allocation bases are proper for the computation of indirect rates. Now however, they have another source or reference point to help make those determinations.
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