NCJ Number
80567
Journal
Management Accounting Volume: 62 Issue: 9 Dated: (March 1981) Pages: 52-56
Date Published
1981
Length
5 pages
Annotation
Steps for a company to take in preparing for a Government audit prior to the award or implementation of a Federal contract are discussed.
Abstract
Government contract accounting involves a variety of job cost accounting, refined and modified for cost accounting standards and allowable and unallowable costs, pursuant to the contracting agency's procurement regulations. To establish that a proposed contractor's accounting system and records are satisfactory and will generate allowable and allocable costs of the proposed contract, the Government usually uses a 'pre-award' audit. The recommended minimum accounting and cost records necessary to satisfy the Government are records of original entry, ledgers/subsidiary ledgers, and supporting records or back-up data. The Government will expect to find these minimum records or variations of them in an accounting system, whether it is a hand-posted system or a computerized system. Because of possible changes in the scope of work, specifications, or the contract itself, the contractor's accounting system should be constructed flexibly, so that the costs of major changes can be controlled separately. To be ready for a Government audit, a company should be certain that all entries have been recorded in original entry journals, including unpaid invoices, notes payable, accrued payrolls, inventories, etc. Also, all entries in books of original entry should be supported by genuine documents. An examination of internal control will give attention to levels of supervisory review and approval, systems of authorization, segregation of duties, substantiation for write-offs, and related controls. Also discussed are features that should be found in cost control systems and the determination of unallowable costs. One footnote is included.