Free FAR Audits & Cost Monitoring Questions and Answers

Question 1

What is the primary role of the Defense Contract Audit Agency (DCAA)?

Accepted Answer

To audit government contracts

Answer

The Defense Contract Audit Agency (DCAA) serves as the primary audit agency for the Department of Defense. Its core mission is to perform contract audits and provide accounting and financial advisory services. This ensures that government contractors comply with contract terms and federal regulations, safeguarding taxpayer interests by verifying the accuracy and allowability of costs.

Question 2

Which of the following best describes a cost monitoring system?

Accepted Answer

It tracks budget vs. actuals

Answer

A cost monitoring system is a financial management tool designed to continuously track and compare actual project expenditures against the established budget or cost estimates. By regularly comparing 'budget vs. actuals,' organizations can identify variances, assess financial performance, and take timely corrective actions. This process is crucial for maintaining cost control and ensuring projects stay within their financial parameters.

Question 3

An incurred cost audit is typically performed:

Accepted Answer

After cost-reimbursement contracts

Answer

An incurred cost audit is typically performed after the completion of a cost-reimbursement contract or at the end of a contractor's fiscal year. Its purpose is to verify the actual costs claimed by the contractor for reimbursement. This audit ensures that all submitted costs are allowable, allocable, and reasonable according to the contract terms and FAR Part 31 cost principles, leading to the final settlement of the contract.

Question 4

What is the key purpose of forward pricing rate agreements (FPRAs)?

Accepted Answer

To forecast indirect costs

Answer

Forward Pricing Rate Agreements (FPRAs) are formal agreements between the government and a contractor that establish indirect cost rates for a specified future period. These rates, such as overhead or general and administrative (G&A) expenses, are then used for pricing new contracts or modifications during that period. FPRAs streamline negotiations by forecasting and agreeing upon indirect costs in advance, providing predictability for both parties.

Question 5

Which regulation governs cost principles for federal contracts?

Accepted Answer

FAR Part 31

Answer

FAR Part 31, titled 'Contract Cost Principles and Procedures,' is the definitive regulation that governs the allowability, allocability, and reasonableness of costs incurred by contractors under federal contracts. It provides detailed guidance on which costs can be reimbursed by the government. Adherence to FAR Part 31 is critical for all cost-reimbursement type contracts and for pricing fixed-price contracts that require certified cost or pricing data.

FAR - Certified Cost or Pricing Data Specialist Practice Test

FAR - Certified Cost or Pricing Data Specialist Practice Test

Free FAR Audits & Cost Monitoring Questions and Answers