Updated November 2026 · VG CPA PC advisors
Pre-award and proposal audits
Pre-award accounting system surveys (SF 1408) test whether your system can support cost-type contracts. Proposal audits examine the cost or pricing data supporting a price proposal, including labor rates, indirect rates and estimating methods.
For proposals subject to certified cost or pricing data, the audit also tests whether the data was accurate, complete and current.
Incurred cost and business system audits
Incurred cost audits examine your annual submission of actual costs and indirect rates, testing transactions, unallowable cost exclusions and allocations. Business system audits review accounting, estimating, purchasing and other systems under DFARS rules.
Labor floor checks and timekeeping reviews are often performed as part of these audits.
How to prepare
Designate one point of contact, confirm the scope at the entrance conference, provide data promptly and keep a log of requests and responses. Reconcile the submission to your general ledger before the auditor does.
Review draft findings carefully and respond in writing. Factual corrections at the draft stage are much easier than disputes after a final report reaches the contracting officer.