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Auditing Government Contractors
OVERVIEW OF THE INDUSTRY   
LAWS AND REGULATIONS   
(a) Cost Principles,   
(i) FAR,   
(ii) OMB Circular A-122,   
(iii) OMB Circular A-21,   
(b) Cost Accounting Standards,   
(c) Other Provisions of the FAR,   
(i) Truth in Negotiations Act,   
(ii) Limitation of Cost,   
(iii) Unilateral Changes,   
(iv) Contract Termination,   
(d) Oversight,   
ACCOUNTING PRINCIPLES AND PRACTICES   
(a) Revenue Recognition,   
(b) Contract Costs,   
(c) Contract Cost Estimates,   
(d) Provisions for Anticipated Losses,   
(e) Contract-Related Assets and Liabilities,   
(f) Research and Development Activities,   
RISK FACTORS   
(a) Repricing of Contracts,   
(i) CAS,   
(ii) Defective Pricing,   
(iii) Cost Audits,   
(iv) Most Favored Customer Provision,   
(b) Claims,   
(c) Suspension,   
(d) Fraud, Waste, and Abuse,   
(e) Subcontractors,   
INTERNAL CONTROL   
(a) Codes of Ethics,   
(b) Estimating Process,   
(c) Contract Cost Accounting Practices,   
(d) Unallowable Costs,   
(e) Job Order Integrity,   
(f) Contract Revenue Recognition Practices,   
(g) Pending Contracts and Modifications,   
SUBSTANTIVE TESTS   
(a) Timeliness of Government Audits,   
(b) Contracts in Progress,   
OVERVIEW OF THE INDUSTRY
Various types of entities may enter into contracts with the federal government,1 for example, aerospace or other manufacturers, professional services firms, health care intermediaries, or research universities. Most of their essential business processes are the same with respect to their government contracting activities as with respect to their private-sector business. It is not the nature of what a contractor does that presents unique auditing issues; rather, it is the contractor's relationship with its customer when the customer is the federal government.
That relationship is defined by regulations with which federal government contract