(a) Review required
Not later than 180 days after the date of the enactment of this Act, the Secretary of Defense shall seek to enter into a contract with an entity that conducts audits, reviews, or surveillance of companies listed on a national securities exchange, to conduct a comprehensive review of the standards, guidance, and policies of the defense audit agencies relating to audits, reviews, and surveillance of defense contractors. The purpose of the comprehensive review shall be to identify opportunities to improve the processes of the defense audit agencies for auditing, reviewing, and surveilling defense contractors, including to streamline the auditing, reviewing, and surveilling processes, ensure materiality of reviews, and generally improve the effectiveness of the audits, reviews, and surveillance activities of the defense audit agencies.
(b) Elements
The comprehensive review required by subsection (a) shall assess the following:
A comparison of—
the processes used by the defense audit agencies to conduct audits, reviews, and surveillance of defense contractors; and
industry best practices for such processes.
A comparison of—
the standards used by the defense audit agencies in connection with such audits, reviews, and surveillance, including the use of materiality standards; and
industry best practices for such standards.
The extent to which industry best practices are applicable and transferrable to the audits, reviews, and surveillance of defense contractors by the defense audit agencies.
(c) Report
Not later than one year after the date of the enactment of this Act, the entity contracted for the comprehensive review required by subsection (a) shall provide a report on the results of the review to the Secretary of Defense and the Inspector General of the Department of Defense. The report shall include—
findings on the effectiveness of the defense audit agencies in conducting audits, reviews, and surveillance of defense contractors;
the comparison described in subsection (b)(1);
the comparison described in subsection (b)(2);
the assessment described in subsection (b)(3); and
Recommendations for improving the effectiveness of the defense audit agencies in conducting audits, reviews, and surveillance of defense contractors, including recommendations for—
improving the training of the staff of the defense audit agencies who conduct such audits, reviews, and surveillance;
improving the accuracy and reliability of such audits, reviews, and surveillance;
ensuring the use of a materiality standard similar to the standard used in generally accepted auditing standards;
improving the processes used by the defense agencies to conduct such audits, reviews, and surveillance;
relieving the burdens on defense contractors of such audits, reviews, and surveillance without undermining the effectiveness and integrity of such audits, reviews, and surveillance; and
ensuring the effective implementation of such recommendations by the defense audit agencies and the effective monitoring of such implementation.
(d) Submission to congressional committees
Not later than 60 days after the date on which the Inspector General of the Department of Defense receives the report required by subsection (c), the Inspector General shall submit to the congressional defense committees an unaltered copy of the report, along with any comments or recommendations that the Inspector General considers appropriate.
(e) Definitions
In this section:
The term defense audit agency means the Defense Contract Audit Agency and the Defense Contract Management Agency.
The term industry best practices means the best practices used to conduct audits, reviews, and surveillance of companies listed on a national securities exchange, in accordance with generally accepted auditing standards or national securities exchange requirements, as appropriate.
The term national securities exchange means an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78f ).