Recently the DCAA has revised its guidance to its auditors significantly. One such change is how they assess accounting systems. Now auditors are supposedly limited to a pass/fail evaluation. In the past auditors had the flexibility to `consider materiality, and contractor actions in making an assessment. This guidance was presumed to be focused on the major contractors, but I had suspicions that it would flow down to small contractors. Recently I have witnessed that this change in guidance is now impacting small and medium sized businesses as auditors appear inflexible in their evaluations. I have successfully raised the issue up the chain of command and have negotiated with contracting officers in some cases.

Bottom line is this, auditors will be more indifferent to materiality and contractors will need to enhance their systems to minimize the effect these changes will have. This will include internal controls and documented procedures.