Acc 360 Cost Accounting : Assessment Answers

The contracting officers who approve the payments or the work done by the contractor do this on the basis od the relevant proofs and work completion certificates. They also discuss with the experts and the auditors and then approve or disapprove the claim and ask for the relevant corrections to be done (Knechel & Salterio, 2016). Firstly, the contracting officer will do the initial determination based on proofs and also review the auditor’s findings and in case no deviation is found, he shall notify the contractor of the acceptance and approval of the acoounting system. And, in case any of the inefficiencies are found, the espective contractor would be informed about the same in writing and would be asked to give a clarification in next 30 days, post which the final determination is due to be done.

Once the deficiencies are corrected by the contractor, the contracting officer will again review the same and take the audtors comments in account and then approve the same or will ask the contractor to correct or submit a detailed corrective plan within the next 45 days and for the time being, would disapprove in the system which would result in withholding the payments. The contracting officer may also allow additional time based on the reasonableness of the circumstances or may also reduce the negotiation for fees. He may also need to use the alternative cost analysis techniques to determine the actual cost elements (Alexander, 2016).

Cost realism evaluation is a common thing which is done to access the cost, to verify the understanding of the offeror of the relevant requirements, to access the risk being considered in proposals, the technical evaluation done, to check whether the cost included in the price or technical proposal actually represents the work effort (Rezaee, Z., & Elmore, R. C., 1993). Some information and data requirements which are used for cost realism evaluation include manloading i.e., mix of labour hours, rates of labour and overhead, and make or buy plans. Price history is also being used to evaluate the same. All this depends on the complexity of the procurement made and what data is already there with the contracting officer (Kim, J., Kuo-Liang, C., & Philips, P., 2012).

Findings

The research has been completed using the 3 reviewed scholarly articles of the erecnt past based on the same topic namely “Understanding Contract Audits: An Experimental Approach”, “ The relation of audit contract type to Audit Fees and hours”, and “Competing Philosophies in the Circuits Regarding Post-Contract Grievances: An Employer's Perspective”. The 1^st one discusses on the contract audits which is being initiated by the buyer to decrease the information asymmetry among buyer and seller w.r.t. prices and other information. It is being widely used in the monopolistic and oligopolistic markets as in case of the government procurements. Hypotheses is being developed using 3 different literatures namely the transaction cost theory, the planned behaviour theory and the social prefernence theory. This experimental approach is being widely used as the traditional economic model is not helping in explaining this. The theory of planned behaviour and the contract audits also helps in decreasing the transaction costs and increases negotiation. They also tend to increase the trade surplus for the buyer which ultimately sets off with the audit costs (Bertrand, R. M., Schram, A. C., & Vaassen, E. J., 2013). The 2^nd one discusses on audit contract type based on 2 parameters mainly fixed fees or reimbursement of cost. This may impact the no. of audit hours as well as audit fee based on incentive for efficiency and risk sharing. Earlier it was hypothesized that the fixed fees audits resulted in higher audit fees and lower audit hours whereas in actual the situation is just opposite. Also, it was found that during the initial client-auditor engagement, more of fixed fee contract tended to be used however, in actual, it didn’t lower the audit fees (Palmrose, Z., 1989). The 3^rd article discusses extensively on the post contractual grievances being raised by the union employees on the companies and the businesses post the labor contracts. Employers generally avoid or refuse to arbitrate the same but the union makes use of Section 301 to compel arbitration as a result of which the employer has to face expensive litigation fees. Federal circuit court decisions have created even more uncertainity in this regard however the Nolde Brothers case aims to put an end to it and give more clarity on the same (Hodapp, P. F., 1991).

Conclusion 

From the above discussion and research topics, we find that there is a huge scope of improvement in all the areas namely increasing the transparency and use of the contract audits and making it more profound and informative using unique model designs. Moreover, the audit fees hardly depends on the type of contract being chosen as all the companies follow a competitive pricing model and factor all the relevant costs, however, the fees charged can be seen more rationally using unique pricing models. Finally, the issue of arbitration in case of post employment contracts needs to be sorted out and needs to be defined such that all the labor grievances are also being solved and the employers are also not driven to arbitration unnecessarily.

References

Alexander, F. (2016). The Changing Face of Accountability. The Journal of Higher Education , 71 (4), 411-431.

Bertrand, R. M., Schram, A. C., & Vaassen, E. J. (2013). Understanding Contract Audits: An Experimental Approach. Auditing: A Journal Of Practice & Theory, 32(1), 1-31. doi:10.2308/ajpt-50306

Guragai, B., Hunt, N. C., Neri, M. P., & Taylor, E. Z. (2017). Accounting Information Systems and Ethics Research: Review, Synthesis, and the Future. Journal Of Information Systems, 31(2), 65-81. doi:10.2308/isys-51265

Hodapp, P. F. (1991). Competing Philosophies in the Circuits Regarding Post-Contract Grievances: An Employer's Perspective. Labor Law Journal, 42(1), 35-44.

Kim, J., Kuo-Liang, C., & Philips, P. (2012). The Effect of Prevailing Wage Regulations on Contractor Bid Participation and Behavior: A Comparison of Palo Alto, California with Four Nearby Prevailing Wage Municipalities. Industrial Relations, 51(4), 874-891. doi:10.1111/j.1468-232X.2012.00708.x

Knechel, W., & Salterio, S. (2016). Auditing:Assurance and Risk (fourth ed.). New York: Routledge.

Palmrose, Z. (1989). The Relation of Audit Contract Type to Audit Fees and Hours. Accounting Review, 64(3), 488.

Rezaee, Z., & Elmore, R. C. (1993). The Need for Enhanced Defense Contractor Cost Management Systems. Public Budgeting & Finance, 13(4), 45-56.