Difference between revisions of "Mandatory Annual Audit Requirements (MAARs)"
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| 3.Permanent Files || Maintain/update permanent files for new or changed contractor organizations, operations, policies, procedures, internal controls, software programs, and accounting methods that influence the nature, level, and accounting treatment of costs being charged to Government contracts. Update documentation of contractor contract briefing system or update auditor-prepared briefs. || To provide an efficient and effective repository of current audit information. Permanent file maintenance should help identify the need for further audit and analysis, and help in determining the accounting methods that influence the nature, level, and extent of further testing required in specific cost accounts, functions, operations, and departments. || 3-302.1, 3-302.2, 4-405 | | 3.Permanent Files || Maintain/update permanent files for new or changed contractor organizations, operations, policies, procedures, internal controls, software programs, and accounting methods that influence the nature, level, and accounting treatment of costs being charged to Government contracts. Update documentation of contractor contract briefing system or update auditor-prepared briefs. || To provide an efficient and effective repository of current audit information. Permanent file maintenance should help identify the need for further audit and analysis, and help in determining the accounting methods that influence the nature, level, and extent of further testing required in specific cost accounts, functions, operations, and departments. || 3-302.1, 3-302.2, 4-405 | ||
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| − | | | + | | 4.Tax Returns and Financial Statements || Evaluate applicable tax returns, financial statements, and other publicly available data of the contractor. || To highlight possible areas to reduce the extent of DCAA audit effort that might otherwise be required. || 3-204.16c |
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| − | | | + | | 5.General Ledger, Trial Balance, Income and/or Credit Adjustments || Analyze the contractor's general ledger, trial balance, and other income/accounting adjustments (for example, unusual and/or sensitive journal entries). || To help identify any income and credits which the Government may be entitled to obtain or share, and to evaluate the exclusion of any adjustments not reflected by the contractor in Government contract costs. || Example |
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| Example || Example || Example || Example | | Example || Example || Example || Example | ||
Revision as of 09:24, 29 January 2015
Contents |
Introduction
The DCAA Contract Audit Manual http://www.dcaa.mil/cam/Chapter_06_-_Incurred_Costs_Audit_Procedures.pdf Chapter 6, Section 105 (6-105) gives a very good overview of Mandatory Annual Audit Requirements.[1]
MAARs are generally necessary to comply with generally accepted government auditing standards (GAGAS) in the incurred cost contract audit environment at major contractors. The MAARs vary in purpose, and type of controls and transactions tested.
Schedule of Mandatory Annual Audit Requirements
Table 6-1S1 DCAM Supplement list the 19 MAARS Requirements (DCAM, page 613, see link in introduction)
| Number and Title | Objectives | Purpose | DCAM Reference |
|---|---|---|---|
| 1.Internal Control Audit Planning Summary and/or Internal Control Questionnaire (ICQ) | Document/update in the permanent files the internal control audit planning summary and/or the internal control questionnaire and evaluate changes in contractor’s internal controls. | Determine the extent of reliance that can be placed on the internal controls for contract costs and the need for and extent of substantive testing that may be required based on the observed strengths or weaknesses of contractor systems. | 3-300,5-100, 5-111 |
| 2.Contract Cost Analysis and Reconciliation to Books | Evaluate summaries of the contractor's total annual contract costs by major cost element (material, subcontracts, intracompany charges, and credits, etc.), and verify that the auditable contract costs reconcile to contractor accounting records by cost element (typically using work-in-process or other contract control accounts in the general ledger). | To provide an overview and order-of-magnitude frame of reference for direction of audit effort and other audit planning/performance considerations, and to verify that the auditable costs claimed or to be claimed on Government contracts tie in to the amounts produced by the accounting system in the contractor’s official books and records. | 6-610.1 |
| 3.Permanent Files | Maintain/update permanent files for new or changed contractor organizations, operations, policies, procedures, internal controls, software programs, and accounting methods that influence the nature, level, and accounting treatment of costs being charged to Government contracts. Update documentation of contractor contract briefing system or update auditor-prepared briefs. | To provide an efficient and effective repository of current audit information. Permanent file maintenance should help identify the need for further audit and analysis, and help in determining the accounting methods that influence the nature, level, and extent of further testing required in specific cost accounts, functions, operations, and departments. | 3-302.1, 3-302.2, 4-405 |
| 4.Tax Returns and Financial Statements | Evaluate applicable tax returns, financial statements, and other publicly available data of the contractor. | To highlight possible areas to reduce the extent of DCAA audit effort that might otherwise be required. | 3-204.16c |
| 5.General Ledger, Trial Balance, Income and/or Credit Adjustments | Analyze the contractor's general ledger, trial balance, and other income/accounting adjustments (for example, unusual and/or sensitive journal entries). | To help identify any income and credits which the Government may be entitled to obtain or share, and to evaluate the exclusion of any adjustments not reflected by the contractor in Government contract costs. | Example |
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MAARs 1, Internal Control Audit Planning Summary and/or Internal Control Questionaire
- Objectives:
Document/update in the permanent files the internal control audit planning summary and/or the internal control questionaire and evaluate changes in contractors internal controls.
- Purpose:
Determine the extent of reliance that can be placed on the internal controls for contract costs and the need for and extent of substantive testing that may be required based on the observed strengths or weaknesses of contractor systems.
- DCAM Reference:
3-300, 5-100, 5-111
MAARS 2, Contract Cost Analysis and Reconciliation to Books
- Objectives
Evaluate summaries of the contractor’s total annual contract costs by major cost element (material, subcontracts, intracompany charges, and credits, etc.), and verify that the auditable contract costs reconcile to contractor accounting records by cost element (typically using work-in-process or other contract control accounts in the general ledger).
- Purpose
To provide an overview and order-of-magnitude frame of reference for direction of audit effort and other audit planning/performance considerations, and to verify that the auditable costs claimed or to be claimed on Government contracts tie in to the amounts produced by the accounting system in the contractor’s official books and records.
References and Notes
- ↑ Defense Contract Audit Manual (DCAM)
