How a DCAA Walkthrough Works
A typical walkthrough follows one or more representative transactions through the relevant workflow. The contractor usually begins with the source document and explains each subsequent activity, including approvals, system entries, reviews, reconciliations, and final reporting.
- Select the process: Identify the accounting or operational area being reviewed, such as labor charging, purchasing, billing, or indirect costs.
- Choose representative evidence: Gather source documents and transaction records that demonstrate the process in practice.
- Explain responsibilities: Identify employees, managers, system users, and control owners involved at each stage.
- Demonstrate system flow: Show how information moves through relevant ERP modules, accounting records, and approval workflows.
- Connect controls to evidence: Explain how approvals, reconciliations, reviews, and supporting documentation establish control over the process.
Key Areas Covered in a DCAA Walkthrough
The subject of a walkthrough depends on the audit scope. Labor and timekeeping processes are particularly relevant because labor charges can affect direct costs, indirect cost allocation, billing, and contract reporting.
For preparation on labor-related procedures, the DCAA Timekeeping & Labor Cost Tracking Guide covers DCAA timekeeping requirements, labor cost tracking practices, compliance rules, and approaches for maintaining audit readiness. A walkthrough can use those principles to explain how employees record time, supervisors review entries, and accounting systems incorporate approved labor information.
Procurement walkthroughs can trace a requisition through sourcing, approval, and purchasing controls. For example, a purchase order walkthrough may demonstrate how an authorized request becomes an approved order and how the resulting transaction is recorded and monitored.
Accounting walkthroughs can similarly trace journal entries, indirect cost allocations, billing transactions, reconciliations, and supporting documentation. The objective is to show the relationship between the documented control and the transaction evidence produced by the process.
ERP Systems and DCAA Walkthroughs
An ERP walkthrough focuses on how financial information and controls operate within the organization's technology environment. Contractors may demonstrate user access, transaction entry, approval workflows, accounting classifications, system-generated records, and reporting outputs.
When reviewing ERP selection or integration, the DCAA-Compliant ERP: 2026 Buyer's Guide + AI Audit Tips provides guidance on ERP capabilities, migration, integration, and extending finance workflows around an ERP while supporting year-round audit readiness.
For a broader evaluation of ERP systems used by government contractors, the ERP for Government Contractors: The Complete Guide (2026) addresses ERP selection, DCAA compliance considerations, leading systems, and implementation practices. These considerations can help contractors understand which system records and workflows should be demonstrated during a walkthrough.
Walkthrough Testing and Control Evidence
A walkthrough is closely connected to control testing because the reviewer can observe how a transaction moves through the organization and identify the evidence generated at each control point. Walkthrough Testing generally involves tracing a transaction or process through its stages to understand how controls operate within a finance or business workflow.
For example, a contractor may trace an invoice from receipt through validation, approval, accounting entry, and payment. The walkthrough can identify who performs each activity, which system records the action, and what documentation supports the completed control.
The same approach can apply to labor, purchasing, revenue, indirect costs, and other processes within the DCAA audit scope. The emphasis is on demonstrating the actual workflow rather than simply describing the policy.
Preparing for a DCAA Walkthrough
Preparation should focus on selecting representative transactions and ensuring that the people demonstrating the process understand both the operational steps and the related control objectives. Finance and compliance teams should reconcile system evidence with supporting documents before the walkthrough begins.
- Document the process from initiation through accounting or reporting completion.
- Identify every key approval, review, and system handoff.
- Prepare representative source documents and system records.
- Confirm that process owners can explain their responsibilities clearly.
- Maintain consistent terminology between policies, procedures, systems, and supporting evidence.
Teams should also distinguish between the formal process and exceptions that may occur in practice. When an exception is relevant to the walkthrough, explaining its authorization, documentation, and accounting treatment provides useful context for understanding the control environment.
Benefits of a Structured Walkthrough
A well-organized DCAA walkthrough creates a shared understanding of how processes operate and how financial information moves through the organization. It can help connect policies, personnel responsibilities, ERP workflows, source documentation, and accounting records into one traceable process.
For finance leaders, this understanding is useful when preparing for audit inquiries, reviewing internal controls, documenting procedures, and identifying where supporting evidence is generated. It also provides a practical foundation for maintaining consistent financial reporting and contract-cost documentation.
Summary
A DCAA Walkthrough provides a structured demonstration of how a government contractor performs a financial or operational process and how related controls operate. By tracing representative transactions through approvals, systems, accounting records, and supporting evidence, contractors can clearly demonstrate their processes and strengthen audit readiness. Effective preparation centers on accurate documentation, knowledgeable process owners, representative transactions, and a clear connection between controls and financial records.