Tuesday, May 24, 2011

Access to Records

There are many statutes, implementing regulations and contract terms that provide access to contractor records for purpose of audit by GAO, the Inspector General (IG) organizations, and contracting officer (CO) representatives usually meaning the cognizant contract audit organization. The Government has clearly defined rights to come in and audit the books and records of Government contractors. The right of access however does not extend beyond what is reasonably required for the audit being performed. We hear from time to time including a case last week where auditors request books and records that do not, on the surface, pertain to the matter at hand. So we think that it would be opportune to review the policies. We do so from the guidance published for the DoD contract auditors.

Inherent in audit responsibility is the right of auditors to determine the specific records or other evidential matter needed to accomplish the audit. Auditors must adhere to generally accepted Government auditing standards in determining what comprises competent, relevant, and sufficient evidential matter. Therefore, auditors must use good judgment and rationale in deciding what contractor records or other evidential matter should be sought. In determining the sufficiency of evidence needed, auditors must consider the audit objective, the risk, and materiality of an error or misstatement in the area being audited and the effect on the audit opinion (see CAM 1-504.1.d.)

Most of the time, auditors will make informal requests (either orally or as a written list) for records. The audit need for the requested information is rather obvious and the records are routinely provided. For example, an auditor, reviewing incurred costs claimed for reimbursement might request to review the support for a material purchase. Keeping things informal greatly facilitates the audit and that is to the benefit of both the auditor and the contractor.

Sometimes, however, auditors will make requests for data and records that, in the contractors judgment, have no bearing on the matter under audit. In those cases, contractors should question the relevancy of the request. According to DoD guidance, auditors must be prepared to discuss the basis for the request and to explain the underlying audit need (see CAM 1-504.36.a). A retort along the lines "because I want it" as we recently witnessed, is not satisfactory or compliant with DoD guidance.

Unusual or extensive requests must be made in writing by someone higher than the auditor (see CAM 1-504.36.e). "Unusual or extensive" is not defined so that could potentially become an issue in itself. Auditors are not permitted to remove original records from the contractor premises. They can make (or request) copies of pertinent records for working paper documentation. However, auditors should not request contractors to reproduce records so that he/she can work at home (or another worksite).

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