CCA Construction Fraud Detection and Prevention Flashcards
6 cards from real CCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CCA Construction Fraud Detection and Prevention flashcards as text
Which of the following billing schemes is most commonly identified by CCA auditors on construction projects?
Answer: Overbilling for work not yet performed or billing for work never completed
Front-loading and billing for incomplete or non-existent work is the most prevalent billing fraud on construction projects, exploiting the difficulty of verifying work completion in the field.
What is bid rigging in construction procurement, and how does an auditor typically detect it?
Answer: Collusion among bidders to predetermine the winner, detected by statistical analysis of bid amounts and patterns
Bid rigging involves competitors coordinating bids so that a designated winner submits the lowest price, detectable through statistical anomalies like identical bid amounts, complementary bidding patterns, and bid rotation.
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:
Answer: Ghost employee payroll fraud using a single address to collect multiple paychecks
Multiple employees sharing an identical address on payroll records is a classic indicator of ghost employee fraud, where fictitious workers are added to payroll to divert funds.
Which audit technique is most effective for detecting materials overbilling on a construction cost-plus project?
Answer: Tracing vendor invoices to actual delivery tickets and performing a physical inventory of materials on site
Comparing billed quantities on vendor invoices to delivery tickets and conducting a physical inventory reconciliation exposes overbilling of materials never delivered or already used on other projects.
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?
Answer: Disallow depreciation and verify that only the contractually allowable equipment use rate is charged
Cost-plus contracts typically specify allowable equipment rates; double-charging by billing both depreciation and an equipment use rate is impermissible.
Which behavioral red flag in a construction project manager most commonly precedes discovery of contract fraud?
Answer: Refusing to take vacation, insisting on personally handling all payments and approvals without oversight
Refusal to take vacations and insistence on sole control over financial processes are classic fraud indicators because perpetrators fear that a substitute will discover the scheme in their absence.