Termination of fixed-price supply contracts ; Examination of contractors' statements of proposed settlements;

              Statements on Auditing Procedure
Termination of Fixed-Price Supply Contracts
December 1943
No. 20
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Issued by the Committee on Auditing Procedure American Institute of Accountants, 13 East 41st Street, New York 17, N. Y.
Examination of Contractors' Statements of Proposed Settlements
Copyright 1943 by American Institute of Accountants
MANY government supply contracts have already been termi-nated. Acceleration of the trend of cancellation of contracts for the convenience of the government is to be expected as the war progresses. At the conclusion of hostilities it seems likely that a high percentage of remaining contracts will thereupon be terminated. Prompt and fair settlements will be of vital importance to industry and the nation.
The preparation of termination proposals and the necessary re-views and audits of them at the end of the war will place a heavy responsibility on the accounting profession. Unless the available ac-counting and auditing talent is used with maximum effectiveness, the available supply will not be adequate. The accounting profession faces an opportunity for service to the public and to business on a national scale that is of tremendous significance. It will require ser-vice of a highly proficient character performed on a strictly inde-pendent basis.
Under date of July 7, 1943, the War Department issued a manual entitled "War Department Termination Accounting Manual for Fixed-Price Supply Contracts" (herein referred to as the manual), which contains accounting and auditing instructions. Under date of August 20, 1943, the War Department also published Procurement Regulation No. 15 (herein referred to as PR-15) entitled "Termi-nation of Contracts for the Convenience of the Government"; this contains statements of policies and procedures to be followed in con-nection with contract termination. A copy of each of these two docu-ments has been furnished to each member of the Institute. Every member of the Institute who may be called upon to render any advice or service with respect to termination of War Department contracts should carefully study the manual and PR-15.
There are but three methods under which determination of the amount due to a contractor upon termination may be reached,
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