The Defense Contract Audit Agency, which is charged with overseeing contractors for the Defense Department, made an upfront agreement with "a major aerospace company" to limit the scope of work and basis for an audit, the report said.

When the contractor, who is not named in the report, objected to the draft findings of the DCAA audit, managers at the audit agency assigned a new supervisor to the case and threatened the senior auditor with personnel action if "he did not delete findings from the report and change the draft audit opinion to adequate," according to the GAO report.

Supervisors at DCAA attempted to intimidate auditors, prevented them from speaking with GAO investigators and created a "generally abusive work environment," the report said.

GAO said it launched the investigation on its own after receiving complaints on a hotline about 14 DCAA audits. It conducted more than 100 interviews of more than 50 people involved in the audits at two DCAA locations in California. The report details three of the audits the GAO looked into but does not name any of the contractors.

Chris Isleib, a spokesman at the Pentagon, said he did not have a comment at this time.

Sens. Susan Collins (R-Maine) and Sen. Joseph I. Lieberman (I-Conn.) had asked the GAO in 2006 to investigate the DCAA's audit practices. Collins said the results "raise serious concerns about DCAA's ability to effectively fulfill its critical oversight mission."

"Further work is needed to determine the extent of the problem and what corrective actions are necessary to put DCAA back on the right track, " Collins said in a statement.