Department of Defense Audit Improvement Act

Department of Defense Audit Improvement Act - Establishes the position of Auditor General (AG) in each of the Departments of the Army, Navy, and Air Force, to be appointed by the President by and with the advice and consent of the Senate to be under the supervision of the Secretary of the military department concerned (Secretary). Allows the AG to be removed only by the President.

Establishes three Assistant Auditors General of each department, as follows: (1) Assistant Auditor General for Auditing; (2) Assistant Auditor General for Investigations; and (3) Assistant Auditor General for Inspections.

Requires the AG to be under the authority, control, and direction of the Secretary with respect to audits, investigations, or inspections relating to: (1) sensitive operational plans; (2) intelligence matters; (3) counterintelligence matters; (4) ongoing criminal investigations by other administrative units relating to national security; and (5) other matters the disclosure of which would constitute a threat to national security. Allows the Secretary to prohibit the AG from initiating, carrying out, or completing any audit, investigation, or inspection if necessary to preserve the national security interests of the United States. Requires certain statements and reports if the Secretary exercises such prohibition.

Directs the AG to perform such audit, investigation, and inspection functions as directed by the Secretary. Requires the AG to provide policy direction for such functions within the department. Requires the AG to comply with all standards established by the Comptroller General and the Inspector General of the Department of the Defense (DOD). Requires the AG to perform legislative review and other activities related to promoting economy and efficiency in the department's programs and operations. Requires the AG to inform the Secretary, the Inspector General of DOD, the Secretary of Defense, and the Congress of fraud and other problems, abuses, and deficiencies relating to the administration of programs and operations administered or financed by the department and to recommend corrective action. Directs the AG to avoid duplicative efforts with the Comptroller General and the Inspector General of DOD. Requires the AG to report on criminal violations found. Outlines general administrative powers of the AG with respect to audit, investigative, and inspection functions within the department, including the power to obtain information from other Federal agencies in connection with the performance of such functions. Authorizes the AG to receive and investigate complaints or information from Army employees concerning a possible violation of laws or regulations, mismanagement, waste, abuse of authority, or a substantial and specific danger to the public health and safety. Requires the AG to report to the Inspector General of DOD to aid the Inspector General in the preparation of the semiannual report required under the Inspector General Act of 1978. Requires the AG to cooperate fully with the Inspector General in connection with the performance of any duty or function. Directs the Inspector General to resolve any jurisdictional disputes between the two. Makes conforming amendments and transfers current auditing and investigative functions within the department to the AG within one year after enactment of this Act.

Places the position of Auditor General of a military department at level IV of the Executive Schedule. Includes revelations made to any such Auditor General under the whistleblower protection for members of the armed forces. Requires certain transfers of personnel as a result of the establishment of Auditors General within the military departments. Requires the Secretary of Defense to report to the Senate and House Armed Services Committees within 120 days after enactment of this Act on such transfers. Requires amounts requested for the Auditors General of the military departments to be separately identified in the annual budget justification materials submitted to the Congress by the President. Provides that nothing in this Act changes the relationship between the Inspector General of DOD and the entities of the military departments that carry out audits, investigations, and inspections. Requires the President to submit to the Senate, within 90 days after enactment of this Act, nominations for the Auditor General positions of the military departments.