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Audit, direct costs, fraud

Part 1 - Here is the link for the DoD IG Handbook on Fraud Indicators for Contract Auditors. It has a 1993 date - but it seems to be the most recent version, as I got it directly from their website.

Go to the Table of Contents (pg. 4) - check out the portions of the document related to direct costs (direct materials and direct labor).

Part 2 - Think about the age-old problem of manipulation of direct costs, and how this can be detected during an audit?
Discuss your thoughts about detecting direct costs manipulation during an audit.

Solution Preview

Direct costs manipulation is easy to do, but if one is aware of the job and the requirements, then they are also easy to spot. The most important thing an auditor can do is research the group being audited and what they do. Looking at each project, a pattern will emerge as to the basic needs and requirements. Without some background research, a auditor may have to take too much time to investigate every detail of a ...

Solution Summary

A very brief reply to the stated question of how to find direct costs fraud in an audit. An example is provided.