THE CONGRESS SHOULD AMEND THE NATIONAL SECURITY ACT, AND THE SECRETARY OF DEFENSE SHOULD USE HIS REORGANIZATION AUTHORITY TO RELOCATE THE ARMY AUDIT AGENCY UNDER THE SECRETARY OR UNDER SECRETARY OF THE ARMY AND HAVE THE AUDIT STAFF REPORT DIRECTLY TO THAT OFFICIAL. THE CURRENT SITUATION IS NOT CONCURRENT WITH THE COMPTROLLER GENERAL'S AUDIT STANDARDS REQUIRING THE AUDIT FUNCTION TO BE LOCATED AT THE HIGHEST PRACTICAL ORGANIZATIONAL LEVEL. ALSO, THE INSPECTION AND AUDIT PRIORITY COMMITTEE SHOULD BE ABOLISHED. INTERNAL AUDITORS SHOULD NOT BE RESTRICTED IN SELECTING ACTIVITIES FOR AUDIT AND DETERMINING THE SCOPE OF AUDIT WORK; THE NATURE AND SCOPE OF AUDITS AND INSPECTIONS SHOULD BE MORE CLEARLY DEFINED. THE POSITION OF CHIEF OF THE ARMY AUDIT AGENCY SHOULD BE FILLED BY A PROFESSIONALLY QUALIFIED CIVILIAN. THE USE OF AUDITORS ON NONAUDIT WORK SHOULD BE DISCONTINUED AND THEIR USE ON COMMANDER-REQUESTED AUDITS AND AUDITS OF NONAPPROPRIATED FUND ACTIVITIES SHOULD BE DECREASED. AUDIT STAFF TIME SHOULD BE ALLOCATED SO THAT APPROPRIATELY BALANCED AUDIT COVERAGE IS GIVEN TO FINANCIAL COMPLIANCE, ECONOMY-EFFICIENCY, AND PROGRAM RESULT AUDITS. FINALLY, THE AUDIT FOLLOWUP FUNCTION SHOULD BE TRANSFERRED FROM THE OFFICE OF THE INSPECTOR GENERAL TO THE ARMY AUDIT AGENCY. THE GENERAL ACCOUNTING OFFICE ALSO RECOMMENDS THAT THE AMERICAN NATIONAL RED CROSS ACT OF 1905 BE FURTHER AMENDED TO RELIEVE THE DEPARTMENT OF DEFENSE FROM AUDITING RED CROSS FINANCIAL OPERATIONS. APPENDIXES SUMMARIZE GOVERNMENTAL AUDIT STANDARDS, PROVIDE ORGANIZATIONAL CHARTS OF THE AGENCIES AND DEPARTMENTS INVOLVED, AND DESCRIBE THE MISSIONS OF THE ARMY AUDIT AGENCY AND OF THE INSPECTORS GENERAL. AGENCY ACTIONS ON THE RECOMMENDATIONS ARE ALSO DETAILED. (MHP)