Audit quality problems exist at the Defense Contract Auditing Agency’s offices throughout the nation, including compromise of auditor independence, insufficient audit testing, and inadequate planning and supervision, GAO told the Senate Homeland Security and Governmental Affairs Committee recently in calling for significant reform.
The DCAA, under the DoD comptroller, provides auditing, accounting, and financial advisory services in connection with DoD and other federal agency contracts and subcontracts.
GAO found DCAA’s management environment and quality assurance structure were based on a production-oriented mission that put DCAA in the role of facilitating DoD contracting without also protecting the public interest.
While DCAA has taken several positive steps, DoD and DCAA have not yet addressed fundamental weaknesses in DCAA’s mission, strategic plan, metrics, audit approach, and human capital practices that had a detrimental effect on audit quality, according to GAO-09-468.
GAO in its report also called on the DCAA director to establish a position for an expert on auditing standards or consult with an outside expert on auditing standards to assist in revising contract audit policy, providing guidance on sampling and testing, and developing training on professional auditing standards.
It recommended developing agency-wide training on auditor independence, planning, fraud risk, level of testing, supervision, auditor judgment, audit documentation, and reporting.
GAO further recommended policies and procedures to ensure that auditors who make direct bill decisions are independent of DCAA employees who perform a DoD management function by reviewing vouchers of contractors not eligible for the direct billing program, thereby reducing situations where DCAA auditors are encouraged to reduce their office workload by approving contractors for the direct-bill program.
