DCAA Audits: Widespread Problems with Audit Quality Require Significant Reform

The Defense Contract Audit Agency DCAA under the Department of Defense DOD Comptroller plays a critical role in contractor oversight by providing auditing, accounting, and financial advisory services in connection with DOD and other federal agency contracts and subcontracts. Last year, GAO found numerous problems with DCAA audit quality at three locations in California, including the failure to meet professional auditing standards. This report addresses audit quality issues at DCAA offices nationwide. GAO was asked to 1 conduct a broad assessment of DCAAs management environment and audit quality assurance structure, 2 evaluate DCAA actions to date to correct previously identified problems, and 3 identify potential legislative and other actions for improving DCAA effectiveness and independence. To achieve these objectives, GAO analyzed DCAAs mission, strategic plan, audit policies, and quality assurance program conducted interviews reviewed selected audits at DCAA offices and analyzed legislative and other actions.