DCAA Audits During the COVID-19 Pandemic

DCAA Audits During the COVID-19 Pandemic Shelter in Place

Subject Matters to Consider


Norm McCord Photo

By Norman McCord, Senior Manager 

April 22, 2020


Still Happening

DCAA is still active during this challenging “shelter in place” time but is, for the most part, auditing by email or telephone.  As is certainly true of many business and Government agencies currently operating in the same manner, there are challenges and potential outcomes that may be important to think about and for which to prepare.  On April 10, 2020, DCAA made available a Memorandum for Regional Directors (MRD) (20-PAS-001(R)) addressing the challenges and providing guidance to its auditors.

Challenges for the Contractor

Interactions between auditors and contractor point-of-contact (POC) liaisons can be challenging.  Email and telephone exchange of detailed accounting data and related supporting representations and conversations can sometimes be cryptic: not necessarily straightforward, and misunderstandings can occur with adverse results.

Supporting the audit by providing meaningful and effective walk-throughs, data, documents, and telephonic discussions as requested can be further complicated because of the concern over the security of proprietary information transmitted via email.

Challenges for the DCAA Auditor

The auditors will, of course, face the same challenges overall as the contractor.  Performing audits from a remote location with no firsthand access to contractor personnel, original supporting documentation and system reports prevents the auditor from obtaining meaningful audit data.  Where the lack of original supporting documentation cannot be overcome by implementing adequate alternate to supplant viewing original documents, the auditor is unable to meet the expectation of the 3rd standard of fieldwork under Generally Accepted Auditing Standards which requires:

“Sufficient appropriate evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion…”

Where the DCAA auditor is unable to overcome the lack of access to records to form an opinion, they must:

  • Qualify the results of the audit report due to Scope Limitations, and/or
  • Disclaim an opinion.

Both of the above occurrences will give the Contracting Officer reason for concern and present the contractor with the challenge to overcome the Contracting Officer’s concerns.


There will certainly be instances where a significantly qualified DCAA audit report cannot be avoided under the current circumstances.  However, consider the following suggestions to minimize misunderstanding and poor outcomes:

  • Structure interaction, communication and data transfers between your POC and subject matter experts, and DCAA, to flow seamlessly.
  • Make every effort to provide electronic/digital consistent with and responsive to the audit data request.
  • Provide a description of the location and method of accessing original documents (for the digital data provided) when COVID-19 restrictions are over. Provide some comfort level to the auditor that later data verification will occur without additional challenges.  This will be helpful where the auditor may not be required to issue a “Final” audit report immediately upon completion of field work; but will issue an interim “Initial Determination.”  Where documents can be later verified, it is possible that the report will be issued without qualification.
  • Where DCAA is required to respond timely to the Contracting Officer’s request for an audit (Forward Pricing Proposals and Incurred Cost audits) and to issue the report without delay:
    • Anticipate the nature and significance of the likely report comments related to access to original supporting documents, based on interaction with the auditor during the audit.
    • Prepare to provide the Contracting Officer with offsetting assurances. For example:
      • Previously adequate and accepted Accounting, Estimating, and other system determinations by the Government.
      • No previous history of inadequate supporting original documents.
      • Follow-on purchase for same or similar previous effort.

Capital Edge Consulting is a professional services company comprised of adept problem solvers who deliver tangible results to address today’s most complex U.S. government contracting challenges. Capital Edge helps clients address the challenging regulatory, contractual and compliance requirements of U.S. federal contracts and we have experience working with a wide variety of industries that provide goods or services to the federal government. 

Concerned about staying compliant in the current environment? We can help!

Contact the experts at Capital Edge Consulting today.
Call: (855) 227-3343 or Email: [email protected]

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