The Audit of Overhead in Companies Handling Both Commercial and Government Contracts.

Abstract It is believed that one of the major postwar industrial developments will be the consideration of the subject of overhead as it applies to government contracts. Many types of contracts are being written today to meet the varying conditions of procurement of materials. The principal types which are being negotiated are (1) fixed price agreements, (2) contracts whereby the price is re-determined at some stage of completion or delivery, (3) contracts which provide for reimbursement of all allowable costs, (4) cost plus-a-fixed-fee contracts which are similar to cost reimbursement contracts except that they also provide for a fixed fee, and (5) time and material contracts. The legal and accounting requirements of each type of contract differ. Of the three elements of cost to be reimbursed, the most difficult of application to contracts is usually overhead. There is no rigid formula or set procedure for preparing reports covering overhead studies. The auditor's findings should always be written in clear and concise language and with an orderly presentation of significant information. The scope of the report should include the following: origin of the study, a summary of findings, the scope of the examination, details of the auditor's findings, recommendations and conclusions, and such pertinent exhibits and schedules as may be necessary in each instance.