An evaluation of the application of the Cost Accounting Standards: a case study

Abstract

The purpose of this research project was to examine one company's disagreements with Government contract reviewers over the application of Cost Accounting Standards (CAS). Three specific cases of non-compliance, involving CAS 401, 402, 405 and 418, were examined in detail. These cases were selective because of the relative significance of the dollar amounts involved, the extreme variance in interpreting the standards and the inordinate length of time it took to resolve the issues. After careful analysis of the three cases, specific conclusions and recommendations are presented. Areas covered include: the Administrative Contracting Officer's (AVO) knowledge of CAS requirements, the ability of smaller companies to adhere to CAS requirements, the Government's policy on cost impact and recovery, the difficulty in determining the exact cost impact of non-compliance, and problems inherent in the process of resolving non-compliant cases.