Heretofore, there have been two aspects to auditing CAS Disclosure Statements (DS); adequacy and compliance. The adequacy review focused on whether the DS adequately describes the contractor's current cost accounting practices. The compliance review deals with whether those cost accounting practices are consistent and compliant with applicable CAS standards.
Under the new guidance, auditors will review Disclosure Statements for adequacy prior to deciding whether to accept an engagement to audit for compliance. The "adequacy" review is no longer considered an audit (which is a good thing, in our opinion) so that fact alone improves the chances that reports on adequacy can be issued in a timely manner.
According to the guidance, there are three steps to determining adequacy.
- Determine whether the contractor followed the Disclosure Statement form instructions. DCAA has a "tool" for this task that is not available to the public).
- Determine whether contractor disclosures are consistent (evidently DCAA has another "tool" for this task.
- Gain a thorough understanding of the basis of the described practices, usually during the contractor's walk through of the submission (DCAA is really big on "walk-throughs" these days).
Based on this information, the auditor will assess whether the disclosed practices are current, complete, and accurate (this is a new use of the term "current, complete, and accurate". In FAR, it is used in the context of cost or pricing data). DCAA's definition of current, complete and accurate is as follows:
- Current - disclosed practices are consistent with the contractor's intended practice described during the walk through.
- Complete - contractor completed all items on the form in accordance with the instructions
- Accurate - disclosed practices are consistent with the policies and procedures provided during the walk through.
Once this assessment is complete, the auditor advises the contracting officer who is responsible for making a decision on adequacy. If the contracting officer agrees with the auditor and issues a determination to that effect, the auditor can go ahead and audit the Disclosure Statement for "compliance".