Ethics, Compliance, and Regulatory Standards Flashcards

A construction auditor finds that a subcontractor is performing work without the required state contractor's license. The auditor's primary concern should be:

Answer: Regulatory non-compliance, contract voidability, and liability exposure to the owner

Unlicensed contractor work creates regulatory violations, can void contracts, and exposes the project owner to significant legal and financial liability.

The concept of 'color of money' in government construction contracting refers to:

Answer: Restrictions on using specific appropriated funds only for their authorized purposes

Color of money refers to the legal requirement that federal funds be used only for the specific purpose and within the time period for which they were appropriated.

When a construction auditor receives an anonymous tip alleging fraud, the appropriate response is to:

Answer: Evaluate the tip and determine if sufficient indicators warrant further investigation

Anonymous tips should be evaluated for credibility and specificity; if indicators of fraud are present, a formal investigation may be warranted.

In construction procurement, 'sole source justification' must be documented when:

Answer: A contract is awarded without competitive bidding because only one responsible source can meet the requirement

Sole source justifications are required when competitive bidding is bypassed, documenting why competition is not feasible and why only one source can satisfy the requirement.

An audit reveals that a construction project's contingency funds were used to cover costs from a separate, unrelated project. This practice most likely violates:

Answer: Cost accounting standards and contract terms requiring cost allocation to the correct project

Charging costs to an incorrect project or contract violates cost accounting standards and contract terms that require costs be allocated to the benefiting contract.

A construction auditor is simultaneously performing an audit for a firm and serving as a paid consultant advising that firm on construction management. This situation represents:

Answer: An impairment of independence due to a self-review threat

Auditing one's own consulting work creates a self-review threat that impairs auditor independence and must be avoided.

Which of the following is the most reliable evidence that a contractor complied with certified payroll requirements on a prevailing wage project?

Answer: Certified payroll reports cross-referenced with payroll registers, timesheets, and worker interviews

Cross-referencing certified payrolls with source documents and worker interviews provides corroborating evidence of actual compliance rather than relying on representations alone.