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How To Prepare For A DCAA Audit

January 17, 2022, by Michael Diener

A DCAA audit can seem intimidating, but you can help ensure that it goes well by preparing beforehand. This review discusses how you can prepare for a DCAA audit to ensure that there are no problems found with your staffing, work processes, accounting, and timekeeping.

5 Steps To Take When Preparing For A DCAA Audit

people discussing audit reportYou can prepare for a DCAA audit by downloading the specific audit process that is relevant to your business from the DCAA website, performing your own internal audit, and scheduling an entrance conference, or preparing for a timekeeping audit. The following is a closer look at each step to take when preparing for a DCAA audit.

1. Download The Audit Process For Your Particular Audit

The first step to take when preparing for a DCAA audit is to download the audit process for your particular audit. You can find the audit process the DCAA will use for your particular audit under the Directory of Audit Programs on the DCAA website. This essentially provides you with the DCAA’s playbook for the audit, allowing you to ensure that you are properly organized and prepared for every step.

2. Perform Your Own Internal Audit

Once you are familiar with the audit process the DCAA will use, the best way to prepare is to conduct your own internal audit. For best results, it is recommended to work with a certified public accountant who understands the DCAA audit processes. This will allow you to identify issues with your incurred costs and accounting principles that the DCAA may find noteworthy. Keep in mind, you never want the DCAA to find issues before you do, and you can address any issues that exist before the DCAA conducts the audit.

3. Prepare For The Entrance Conference

The next step in the DCAA audit process is to prepare for the entrance conference. In some cases, a timekeeping audit may be needed instead, which allows the DCAA auditor to visit at an unannounced time. The entrance conference offers an opportunity for the DCAA auditor to visit the worksite and explain the purpose of the DCAA audit. The auditor may ask questions and collect some information and documents. A follow-up visit may be scheduled as well, or the auditor may have the contractor submit documents electronically.

4. Prepare Your Accounting Reports

people preparing accounting reportThe DCAA audit may begin with a review of the contractor’s accounting reports. This may include tracking transactions back to the source and ensuring that costs are incurred appropriately. For example, this may include tracking the costs for travel to verify the costs of a trip and ensure that they were properly documented. If there are any inconsistencies or errors with the expense report, then it could impact the DCAA auditor findings and subsequently the contractor’s future standing with government agencies.

5. Review The Terms And Conditions Of Each One Of Your Contracts

The DCAA auditor will likely review the terms and conditions of your contract to ensure that there are not unallowable costs, such as unapproved overtime charges. With the assistance of a professional CPA, you can benefit from reviewing the terms and conditions of each one of your contracts to determine if there are any unallowable costs.

What Are The Conditions Of A Successful Audit?

In general, four conditions must be met for a DCAA audit to be successful. The following is a review of each condition of a successful DCAA audit.

A Well-Trained And Compliant Staff

The contractor’s staff must understand timekeeping procedures and assist the business in remaining DCAA compliant. This is one of the reasons the DCAA auditor typically visits the work site. Contractors should ensure that they educate their team on the basics of timekeeping and other relevant DCAA compliance measures.

The Company’s Essential Documentation Is Organized

The contractor should have all of their documents properly organized and ready for review. Otherwise, the audit can take longer and the risk of being non-compliant is much higher. Be sure to organize all incurred cost documentation and other financial and work records. A certified public accountant can help ensure that all the necessary documentation is organized.

The Accounting System Is Current And Operational

people discussing financial reportThe contractor should also use an up-to-date accounting system that is operational. Otherwise, the records may be deemed outdated by the DCAA auditor. Once again, this is an area where a CPA professional can assist and ensure that the audit process goes well.

Contract Documents Are Up To Date

All contract documents must be modern as well with all the most recent modifications included. If the newest version of contract documents cannot be provided, then the contractor is at a higher risk of issues during the audit process.

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