Cost Accounting Standards Board (CASB)

Definition

The Cost Accounting Standards Board (CASB) was established by Congress in 1970 in the United States to develop and enforce standards ensuring uniformity and consistency in cost accounting practices among government contractors. The primary objective of CASB is to ensure that government contracts are awarded with accurate and reliable costs measurement, thereby promoting fair and equitable pricing. In 1980, the duties of CASB were transferred to what is now known as the Government Accountability Office (GAO).

Examples

Development of Cost Standards: CASB designs cost accounting standards that contractors must adhere to, ensuring that costs are consistently measured and reported.
Compliance Assessment: A government contractor is required to submit a CASB Disclosure Statement illustrating their cost accounting practices. The disclosure is reviewed for compliance with CASB standards.
Post-Award Audits: CASB standards are used as benchmarks during audits to verify that contractors accurately reported incurred costs and adhered to contractual obligations.

Frequently Asked Questions (FAQs)

What is the main purpose of the Cost Accounting Standards Board (CASB)?

The primary purpose of CASB is to establish guidelines for uniform and consistent cost accounting practices among government contractors and ensure accurate cost reporting for government contracts.

What is a CASB Disclosure Statement?

A CASB Disclosure Statement is a formal written document submitted by a contractor detailing their cost accounting practices to demonstrate compliance with CASB standards.

How does the CASB impact government contracting?

CASB impacts government contracting by setting the standard guidelines for cost accounting, which ensures fairness and transparency in costing, reducing the likelihood of cost disputes.

Did the CASB always belong to the GAO?

No. CASB was initially an independent board established by Congress in 1970. In 1980, its responsibilities transitioned to the Government Accounting Office, now known as the Government Accountability Office (GAO).

What happens if a contractor fails to comply with CASB standards?

Non-compliance with CASB standards can result in contract disputes, financial penalties, or disqualification from future government contracts.

Government Accountability Office (GAO): The GAO acts as the investigative arm of Congress, overseeing the enforcement and compliance of cost accounting standards among government contractors.
Cost Accounting Standards (CAS): These are a set of 19 standards promulgated by CASB to guide cost accounting practices among contractors.
Federal Acquisition Regulation (FAR): This is the principal set of rules governing the acquisition process used by all federal executive agencies.

Online References

Suggested Books

Cost Accounting Standards: Federal Requirements, Practice, and Procedures by CCH Editorial Staff.
A Summary Analysis of Cost Accounting Standards (CAS) Applicability by Pier Digirolamo.
Accounting for Government Contracts – Cost Accounting Standards by Lane Anderson.

Accounting Basics: “Cost Accounting Standards Board” Fundamentals Quiz

### What is the primary purpose of the Cost Accounting Standards Board (CASB)? - [ ] To manage federal budgets - [ ] To regulate tax policies - [x] To ensure uniformity in cost accounting practices among government contractors - [ ] To oversee the stock market > **Explanation:** The primary purpose of CASB is to ensure uniformity and consistency in cost accounting practices among government contractors, facilitating accurate cost reporting. ### In which year was the Cost Accounting Standards Board established? - [ ] 1965 - [ ] 1990 - [x] 1970 - [ ] 1985 > **Explanation:** The CASB was established by Congress in the United States in 1970. ### Which entity took over the responsibilities of CASB in 1980? - [ ] Securities and Exchange Commission (SEC) - [ ] Internal Revenue Service (IRS) - [x] Government Accountability Office (GAO) - [ ] Federal Reserve > **Explanation:** In 1980, the duties of the CASB were transferred to the Government Accountability Office (GAO). ### What document must a contractor submit to demonstrate compliance with CASB standards? - [ ] Annual tax return - [ ] Project proposal - [x] CASB Disclosure Statement - [ ] Financial report > **Explanation:** Contractors are required to submit a CASB Disclosure Statement to demonstrate their cost accounting practices comply with CASB standards. ### What can result from a contractor’s non-compliance with CASB standards? - [x] Financial penalties - [ ] Reduced utility costs - [ ] Increased workforce - [ ] Improved market share > **Explanation:** Non-compliance can lead to financial penalties, contract disputes, or even disqualification from future contracts. ### What primary goal does setting cost accounting standards achieve for government contracts? - [x] Fair pricing and accurate cost measurement - [ ] Reduction in global trade deficits - [ ] Lowering tax rates - [ ] Market monopolization > **Explanation:** The setting of uniform cost accounting standards promotes fair pricing and ensures accurate cost measurement. ### What is the CASB's relationship with the GAO? - [ ] The CASB operates independently of the GAO. - [x] The GAO has regulatory oversight over CASB. - [ ] The CASB replaces the functions of the GAO. - [ ] The GAO and CASB serve unrelated purposes. > **Explanation:** The GAO took over the CASB's responsibilities in 1980 and now has regulatory oversight over it. ### Under which regulation are the standards created by CASB principally applied? - [ ] International Financial Reporting Standards (IFRS) - [ ] Generally Accepted Accounting Principles (GAAP) - [x] Federal Acquisition Regulation (FAR) - [ ] Sarbanes-Oxley Act (SOX) > **Explanation:** Cost accounting standards created by CASB are principally applied under the Federal Acquisition Regulation (FAR). ### Which government entity initially created the CASB? - [ ] Department of Defense (DoD) - [x] United States Congress - [ ] Federal Reserve - [ ] Internal Revenue Service (IRS) > **Explanation:** The Cost Accounting Standards Board (CASB) was established by the United States Congress in 1970. ### What is a key benefit of the standards established by CASB for government contracting? - [ ] Reduced government spending on public services - [ ] Accelerated procurement cycle from vendors - [x] Greater consistency and transparency in cost accounting - [ ] Enhanced competitiveness in private markets > **Explanation:** The standards established by CASB ensure greater consistency and transparency in cost accounting for government contracting.

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