When we note that a company is well-prepared for CAS compliance or accounting system assessment audit, we always encourage companies to have a written accounting policy manual. Too often when we ask about the written accounting policies companies tell us they have an employee HR policy manual which they think is what we are referring to. While the HR employee manual is important, it is different from a written accounting policy manual.

Getting Cost Accounting Policies Ready
We continue to be amazed that companies develop an employee HR policies manual worth a plop factor but spend no time on their accounting policies. HR policies are generally constructed for the employees’ benefit and any employee reporting requirements.  policies are equally important for auditors, employees, and outside authorities.

What do Cost Accounting Policies do?
Accounting policies are the backbone of any well-functioning and Government contracting compliant cost accounting system. Not only does it document the financial operations of the company, but it details the formal accounting plan and rules that the company follows in operating its accounting function. Sometimes, companies have policies but they are not written. While those policies are their policies, an auditor would have a difficult time following the unwritten cost accounting rules of the organization.  The success of the company hinges on the cost accounting practices and how they are implemented. The policies state those standards and allow consistency in how the revenue, costs, assets, and liabilities of the company are treated. A well-documented set of policies basic to the organization’s treatment of its finances helps to prevent loss and the mistreatment of assets.

Who Cares about Cost Accounting Policies?
The written accounting policies allow anyone examining the books of record to know the treatment of these various financial transactions but also provides transparency into the methods used and the practices the company follows. Government auditors always ask to review the written accounting policies to determine the framework of any organization, particularly if they are going to do business with the Federal Government.  Not only does it give the auditor an understanding of the financial statements but how the various types of transactions the company deals with are treated.

For more on this topic see https://www.copedia.com/accounting_policies_and_procedures_manual.htm

 

 

accounting policies

Marsha Lindquist
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