CCA CCA Construction Fraud Detection and Prevention

Question 1

Which of the following billing schemes is most commonly identified by CCA auditors on construction projects?

Accepted Answer

Overbilling for work not yet performed or billing for work never completed

Answer

Underbilling to defer income recognition to the following fiscal year

Answer

Billing for work performed by a competitor on a different project

Answer

Billing for materials at below-market prices to benefit the owner

Question 2

What is bid rigging in construction procurement, and how does an auditor typically detect it?

Accepted Answer

Collusion among bidders to predetermine the winner, detected by statistical analysis of bid amounts and patterns

Answer

A contractor submitting artificially low bids to win work then recovering costs through change orders

Answer

An owner steering contracts to preferred contractors through biased specifications

Answer

A subcontractor submitting bids to multiple GCs for the same project at different prices

Question 3

A construction auditor reviewing payroll records finds that 15 workers have the same home address listed on their W-4 forms. This is most consistent with:

Accepted Answer

Ghost employee payroll fraud using a single address to collect multiple paychecks

Answer

A legitimate crew housing arrangement at a remote project site

Answer

A payroll processing error that duplicated the address field

Answer

Workers sharing a company dormitory during the project

Question 4

Which audit technique is most effective for detecting materials overbilling on a construction cost-plus project?

Accepted Answer

Tracing vendor invoices to actual delivery tickets and performing a physical inventory of materials on site

Answer

Reviewing the contractor's purchasing department organization chart

Answer

Confirming material suppliers' trade references provided by the contractor

Answer

Reviewing the contractor's accounts payable aging report

Question 5

A contractor on a cost-plus project includes depreciation on contractor-owned equipment in the billing to the owner. How should the CCA auditor treat this charge?

Accepted Answer

Disallow depreciation and verify that only the contractually allowable equipment use rate is charged

Answer

Allow depreciation as it represents the actual cost of using the equipment

Answer

Allow depreciation only if the equipment was purchased specifically for this project

Answer

Convert the depreciation to a rental rate and allow at 150% of book depreciation

Question 6

Which behavioral red flag in a construction project manager most commonly precedes discovery of contract fraud?

Accepted Answer

Refusing to take vacation, insisting on personally handling all payments and approvals without oversight

Answer

Submitting detailed expense reports with receipts for all project-related costs

Answer

Requesting an independent audit of the project's financial records

Answer

Reporting potential vendor conflicts of interest to the compliance officer