MRD 08-PAS-041(R) - Audit Guidance on Limited Scope Audit Reports on Internal Controls

DEFENSE CONTRACT AUDIT AGENCY DEPARTMENT OF DEFENSE 8725 JOHN J. KINGMAN ROAD, SUITE 2135 FORT BELVOIR, VA 22060-6219 IN REPLY REFER TO PAS 730.3.B.2.4 December 19, 2008 08-PAS-041(R) MEMORANDUM FOR REGIONAL DIRECTORS, DCAA DIRECTOR, FIELD DETACHMENT, DCAA HEADS OF PRINCIPAL STAFF ELEMENTS SUBJECT: Audit Guidance on Limited Scope Audit Reports on Internal Controls FAO Managers are required to brief FAO staff members on this guidance by March 30, 2009. Summary When internal control deficiencies are identified in other than an internal control audit (e.g., forward pricing proposal audit) the FAO should not wait to perform a full system review to report the deficiencies. The FAO should (1) issue a flash report to report the potential deficiencies, and (2) establish a separate limited scope audit assignment to review the control activities related to the applicable control objective. The limited scope audit assignment should be completed as soon as possible (preferably within 30 days) after the condition is identified. The limited scope audit package must stand on its own and document sufficient work as a basis for the audit opinion and to demonstrate compliance with GAGAS. If the control activities audited are not adequate to ensure that the control objective is accomplished, the audit report will report that the system is inadequate and recommend that the contracting officer disapprove the affected portions of ...