Practice Test Geeks(CCA) Certified Construction Auditor Practice Test
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Construction Cost Principles & Accounting Flashcards

7 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 7 Construction Cost Principles & Accounting flashcards as text

  1. Which accounting method is most commonly used by small home builders for tax purposes because it defers income recognition?

    Answer: Completed-contract method

    The completed-contract method defers all revenue and expense recognition until the contract is substantially complete, providing a tax deferral benefit for qualifying small contractors.

  2. A bid bond guarantees that if a contractor is awarded a project, the contractor will:

    Answer: Enter into the contract and furnish required performance bonds

    A bid bond ensures the contractor will execute the contract and provide performance and payment bonds if awarded the project.

  3. Front-loading a schedule of values inflates early payment applications by:

    Answer: Overstating the cost of early work items and understating later items

    Front-loading assigns higher values to early-schedule line items than their actual cost, enabling the contractor to collect cash in excess of work performed early in the project.

  4. An auditor discovers that equipment depreciation charged to a government contract exceeds the actual cost of the equipment over the contract period. This is a violation of which cost principle?

    Answer: Allowability

    Charging depreciation that exceeds actual equipment cost violates allowability because the government cannot be charged more than the asset's actual cost.

  5. The formula for calculating cost variance (CV) in earned value management is:

    Answer: Earned Value (EV) minus Actual Cost (AC)

    Cost Variance equals Earned Value minus Actual Cost; a negative CV indicates the project is over budget.

  6. Which document formally authorizes a contractor to begin work on a change in scope before a change order is fully executed?

    Answer: Construction change directive (CCD)

    A Construction Change Directive (CCD) directs the contractor to proceed with changed work immediately while the price and time impact are still being negotiated.

  7. Under FAR Part 31, which of the following costs is expressly unallowable on government construction contracts?

    Answer: Entertainment costs and lobbying expenses

    FAR Part 31 expressly identifies entertainment and lobbying costs as unallowable charges to government contracts.