Financial Improvement and Audit Readiness

FIAR Guidance

Untitled Document
About FIAR Guidance

The FIAR Directorate, a program management office, is responsible for managing the FIAR Plan and ensuring that DoD-wide financial improvement efforts continue to mature and are integrated with transformation activities across the Department. Among its responsibilities, the FIAR Directorate develops and issues detailed financial improvement and audit preparation methodologies and guidance, also known as the FIAR Guidance.

The FIAR Guidance provides instructions for implementing a consistent, Department-wide plan for achieving the Department's financial improvement and audit readiness objectives. In accordance with the National Defense Authorization Act of Fiscal Year 2010, Section 1003, the FIAR Directorate developed this guidance for reporting entities and service providers working toward the goal of audit readiness. It defines the department's goals, priorities, strategy, and methodology for becoming audit ready. Furthermore, this guidance details the roles and responsibilities of reporting entities and service providers, and prescribes the specific procedures they should follow to achieve audit readiness.

FIAR Strategy

A clear, comprehensive strategy for achieving audit readiness is critical to ensuring that limited resources are assigned effectively to facilitate sustained and measurable progress. The FIAR strategy provides a critical path for the Department because it balances the need to demonstrate short term accomplishments (Wave 1) against the long-term goal of achieving an unqualified opinion on the Department's financial statements (Wave 4). The first three waves should be performed concurrently because they focus on both of the USD(C)'s priorities, budgetary information and mission critical asset information.

For a detailed description of the specific steps each reporting entity must take to address the requirements of each wave (i.e., identify key risks of material misstatement, financial reporting objectives and key supporting documentation), please click on each wave in graphic below.

Wave 1 Wave 2 Wave 3 Wave 4
Waves Waves Waves Waves

FIAR Methodology

The FIAR Methodology (Methodology) provides a step-by-step approach to achieving improved financial information and audit readiness. Reporting entities should focus their audit readiness efforts on improving their processes, controls, and related documentation based on the results of the application of the Methodology.

The Methodology contains phases and key tasks for achieving improved financial information and audit readiness. The phases and key tasks, which can be applied uniformly regardless of the size, materiality or scope of an assessable unit, are as follows:

  • Discovery: Reporting entity documents its business and financial environment, defines and prioritizes its processes into assessable units, clearly defines the scope of its assertion and strategy for achieving audit readiness, identifies risks and financial reporting objectives and control activities. Reporting entity performs tests of control activities, evaluates supporting documentation, and identifies and classifies weaknesses and deficiencies. Reporting entity submits required work products to the FIAR Directorate for review in accordance with its Financial Improvement Plan (FIP) milestone dates. FIAR Directorate reviews work products to ensure that each audit readiness dealbreaker has been addressed and provides feedback to the reporting entity on an ongoing basis.
  • Correction Action: Reporting entity defines and designs its audit ready environment, develops corrective action plans to resolve deficiencies identified during the Discovery phase, develops budget estimates of required resources to execute corrective actions, executes corrective actions and performs procedures to verify that corrective actions have successfully remediated the deficiencies. Reporting entity notifies the FIAR Directorate that it is ready for an examination of its assessable unit.
  • Assertion/Evaluation: FIAR Directorate evaluates documentation and provides feedback to the Reporting Entity on its audit readiness state. If reporting entities are determined to be audit ready, FIAR engages an auditor to perform an examination of the reporting entity’s audit readiness assertion. The auditor identifies deficiencies, if any. The reporting entity, after evaluating the nature and extent of deficiencies noted by the auditor, implements correction actions to remediate those deficiencies. The reporting entity then performs procedures to verify that correction actions successfully remediated auditor identified deficiencies.
  • Validation: Reporting entity submits examination report and additional documentation demonstrating remediation of auditor identified deficiencies to the FIAR Directorate and DoD OIG. FIAR Directorate reviews examination report and additional documentation supporting remediation of deficiencies and makes a final determination of reporting entity's audit readiness state.
  • Audit: Reporting entity engages an auditor, supports the specified elements audits or full scope financial statement audits. The auditor issues the audit opinion.
Reporting entities are responsible for executing the key tasks and activities in the Discovery and Corrective Action Phases, including developing all required assertion work products to support their audit readiness assertion for their assessable units or financial statements. The OUSD(C) then engages an independent auditor to perform an examination of management’s audit readiness assertion in the Assertion/Evaluation Phase.

Embedded within each phase of the methodology are the reporting entity's considerations of its service providers and how their activities affect its financial processes and related audit readiness initiatives. For a detailed description of the roles, responsibilities and tasks, activities, and resulting work products that must be completed by both reporting entities (Components) and Service Providers, please click the boxes below:

Methodology for Reporting Entities         Methodology for Service Providers

External Links

FM Online (CAC Restricted)

Services Audit Readiness Websites