Mandatory Annual Audit Requirements (MAARs)

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.

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
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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.