We are not going to attempt to digest all 59 recommendations on these pages but we will focus on a few recommendations that will be of interest to Government contractors and the potential for being subject to contract audit (namely audits by the Defense Contract Audit Agency (DCAA)).
Recommendations 71 through 73 share a common theme of adoption of an audit professional practice guide (PPG). Today we will cover Recommendation 71. Coverage of Recommendations 72 and 73 will come later.
The Section 809 Panel is recommending that DoD adopt a professional practice guide to support the contract audit practice of DoD and the independent public accountants DoD may use to meet its contract audit needs, and to establish a working group to maintain and update the guide. The Panel believes that existing audit guidance is too insular. It framed its concern like this:
Although professional standards are common in the auditing profession, none of them have been developed or interpreted for the unique purpose of federal government contract oversight. DCAA's Contract Audit Manual provides a good foundation, but it lacks the collaborative inputs, perspectives, and interpretations of knowledgeable professionals outside DCAA and the government. This point is important because IPAs (Independent Public Accountants) and other qualified professional services firms are playing an increasingly important role in the government's oversight of federal government contracts.According to the Panel, professional standards of importance that require a collaborative interpretation on how to apply the standards in the contract oversight environment include:
- internal controls
- sufficient evidence
- reliance on the work of others
The Panel included a draft Professional Practice Guide for Audits and Oversight of Defense Contractor Costs and Internal Controls in its report. The team that developed the Guide consisted of representatives of the Section 809 Panel, DCAA, DCMA, GAO, AICPA and industry.
Tomorrow we will continue discussion of the draft PPG.