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If You Can’t Believe the Auditors . . . .

The U.S. General Accounting Office released a report (requires Adobe) today in which they “substantiated” allegations that auditors of the Defense Contract Audit Agency (DCAA), which is under the U.S. Department of Defense, “did not meet professional standards.” As a former auditor in the federal government, those professional standards, called generally accepted government auditing standards, or GAGAS, are the holy grail for auditors:

“These standards provide guidelines to help government auditors maintain competence, integrity, objectivity, and independence in their work.”

As GAO notes, DCAA “plays a critical role in DOD contractor oversight by providing auditing, accounting, and financial advisory services in connection with the negotiation, administration, and settlement of contracts and subcontracts. DCAA also performs audit services for other federal agencies, as requested, on a fee-for-service basis.”

In the report, GAO began their conclusions on page 65 by saying:

“In the cases we investigated, pressure from the contracting community and buying commands for favorable opinions to support contract negotiations impaired the independence of three audits involving two of the five largest government contractors. In addition, DCAA management pressure to (1) complete audit work on time in order to meet performance metrics and (2) report favorable opinions so that work could be reduced on future audits and contractors could be approved for direct-billing privileges led the three DCAA (field audit offices) to take inappropriate short cuts— ultimately resulting in noncompliance with GAGAS and internal DCAA (Contract Audit Manual) guidance.”

If you prefer the journalism versions of the report, the Washington Post weighed in first, followed by Forbes magazine although several other news sources have since posted stories at Google. Seems a few people at DCAA deserve time in the pokey.

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