Close Menu
WashingtonExec
    Podcast Episodes
    LinkedIn Facebook X (Twitter) Instagram YouTube
    LinkedIn Facebook X (Twitter) Instagram YouTube
    WashingtonExec
    Subscribe To The Daily
    • News & Headlines
    • Executive Councils
    • Videos
    • Podcast
    • Events
      • 🏆 Chief Officer Awards
      • 🏆 Pinnacle Awards
    • About
    • Contact Us
    LinkedIn YouTube X (Twitter)
    WashingtonExec
    You are at:Home»News»Defense Contract Audit Agency Issues Audit Guidance on Materiality
    News

    Defense Contract Audit Agency Issues Audit Guidance on Materiality

    By WashingtonExec Staff WriterSeptember 25, 2019
    Share
    LinkedIn Facebook Twitter Email

    This article was recently featured in DHG’s July/August GovCon Report. For a limited time, claim a free copy by visiting https://sub.washingtonexec.com/dhg

    DCAA provided a Memorandum for Regional Directors (MRD) to its auditors on applying materiality to incurred cost audits. The memorandum provides guidance that addresses the need to establish quantitative and qualitative factors impacting an audit’s materiality. The guidance should result in greater consistency across DCAA in treating findings as material.

    The first element of materiality discussed in the MRD is a quantitative measure. The guidance provides auditors two formulas and a table showing how to apply the formulas. What qualifies as a quantitative factor is different in every case and depending on the facts of the audit, determined by the overall costs and the value of the questioned costs. The formula for determining whether a given questioned cost is quantitatively material is the same in every audit.

    The second element of materiality discussed in the MRD is a qualitative measure. Qualitative materiality relies on the nature of the questioned cost, not its numeric value. The MRD does not provide a formula for determining the qualitative materiality of a questioned cost. Rather, the MRD addresses qualitative materiality as “Other Considerations” the auditor needs to address. These considerations include customer concerns and prior findings.

    This MRD is helpful in terms of providing a formulaic (quantitative) approach to the issue of which questioned costs in an incurred cost audit are material and providing a common ground for both the government and contractor to have during discussions as to whether a questioned cost is quantitatively material.

    The Section 800 Panel, referenced in previous Report and Digest articles, worked with DCAA, AICPA, GAO and Industry to develop an approach to materiality. The Panel’s work can be found in Volume 3, recommendation 71, page 375, of the Section 800 Panel report. The Section 809 Panel developed a proposed “Professional Practice Guide” for auditing, which looks extensively at the concept of materiality in incurred cost audits.

    This MRD is the first step toward providing a practical method for both the audit community and the industry in reaching a mutual understanding of the materiality of questioned costs going forward.

    Previous ArticlePerspecta Awarded $657M Contract Extension
    Next Article Altamira Awarded as Prime Contractor on Air Force CDM A&T Services Deal

    Related Posts

    WATCH: Arcfield’s Kevin Kelly on Industry’s Role in Boosting Government Efficiency

    Johns Hopkins APL Names Vishal Giare Head of Air & Missile Defense Sector

    CACI Board Chairman and Industry Leader Michael A. Daniels Dies

    Comments are closed.

    LinkedIn Follow Button LinkedIn Logo Follow Us on LinkedIn
    2025 Chief Officer Awards - Winners Revealed
    Latest Industry Leaders

    Top DOD Execs to Watch in 2025

    Top Health Care Execs to Watch in 2025

    Load More
    Latest Posts

    WATCH: Arcfield’s Kevin Kelly on Industry’s Role in Boosting Government Efficiency

    July 15, 2025

    Johns Hopkins APL Names Vishal Giare Head of Air & Missile Defense Sector

    July 15, 2025

    CACI Board Chairman and Industry Leader Michael A. Daniels Dies

    July 15, 2025

    Top DOD Execs to Watch in 2025: CACI’s Meisha Lutsey

    July 15, 2025

    Top Pricing Execs to Watch in 2025: KBR’s Chip Dirth

    July 15, 2025
    Quick Links
    • Executive Councils & Committees
    • Chief Officer Awards
    • Pinnacle Awards
    • Advertise With Us
    • About WashingtonExec
    • Contact
    Connect
    • LinkedIn
    • YouTube
    • Facebook
    • Twitter

    Subscribe to The Daily

    Connect. Inform. Celebrate.

    Copyright 2023 © WashingtonExec, Inc. | All Rights Reserved. Powered by J Media Group

    Type above and press Enter to search. Press Esc to cancel.