The Defense Contract Audit Agency (DCAA) recently issued an audit alert regarding the need to assess contractor corrective actions to previously reported audit findings. Audit findings in this case could pertain to DCAA audit findings and/or findings from audits or studies performed by other than DCAA that are relevant to the subject matter under audit. The "other" audits or studies would include contractor internal audit reports which the Agency has been trying to access, without much success, for many years, management letters issued by a firms independent public accountants, and reviews performed pursuant to the Sarbanes - Oxley Act.
DCAA has modified its audit programs to emphasis this audit step. The additional audit program language requires that auditors review permanent file to determine if previous audits included findings and recommendations that impact the subject matter under audit (GAGAS 5.06). If there were findings, auditors should document this information in the risk assessment and ask contractor management if corrective actions were taken to address findings and recommendations reported in previous DCAA audits (e.g., questioned costs, business system deficiencies, CAS audits) that are relevant to the subject matter of audit. If yes, have contractor explain corrective actions taken and determine if additional audit procedures should be included in the fieldwork to test the corrective actions.
Contractors should anticipate these additional queries during future audits.