DCAA Audit Guidance on Detecting Instances of Fraud in Attestation Engagements

By: Kayla See

On July 30, 2013, the Defense Contract Audit Agency (DCAA) issued a Memorandum for Regional Directors (MRD) (13-PAS-014(R)) regarding “Audit Guidance on Detecting Instances of Fraud in Attestation Engagements.” This memo reiterates the requirements for DCAA audit teams to design examination engagements to detect instances of fraud and other noncompliance with applicable laws, regulations, and contract and agreement terms and conditions that may have a material effect on the subject matter. The memo supplements previously updated language within the DCAA’s Contract Audit Manual (CAM 4-702) and associated training provided to auditors in March and April of this year.

The memorandum suggests information-gathering procedures that auditors may use to understand a contractor and its environment. These procedures include management inquiries, analytical procedures, and audit team discussions.

The memorandum also stresses the importance of auditors being familiar with fraud risk factors and responding to those factors “by designing audit procedures that (i) impact the overall conduct of the audit; (ii) modify the nature, timing and extent of the audit procedures; and/or (iii) address the risk of management override of controls.”

Contractors should stay abreast of DCAA’s audit procedures related to the detection of fraud and strive to implement similar considerations within their internal audit and compliance processes.

The views expressed in this article are those of the authors and do not necessarily reflect the position or policy of Berkeley Research Group, LLC.