CCA Construction Project Management and Controls 2 — Questions and Answers
Question 1: When auditing a construction project's contingency reserve, an auditor should verify that the reserve is:
- Included in the contractor's profit margin
- Separately identified and subject to owner approval for use (Correct answer)
- Distributed equally across all work packages
- Allocated only to subcontractors
Correct answer: Separately identified and subject to owner approval for use
Contingency reserves should be explicitly tracked and require owner authorization before drawdown to prevent unauthorized spending.
Question 2: Which internal control helps prevent a project manager from approving their own invoices on a construction project?
- Dual-signature requirement for payments (Correct answer)
- Monthly variance reporting
- Detailed cost coding
- Percentage-of-completion accounting
Correct answer: Dual-signature requirement for payments
Requiring two authorized signatures on payment approvals ensures no single individual can unilaterally approve their own expenditures.
Question 3: An auditor finds that a construction project's work breakdown structure (WBS) does not align with its cost codes. This discrepancy most likely impairs:
- Site safety reporting
- Accurate cost tracking and performance measurement (Correct answer)
- Labor union compliance
- Environmental permitting
Correct answer: Accurate cost tracking and performance measurement
Misalignment between the WBS and cost codes makes it impossible to accurately track costs by work package and measure performance.
Question 4: In construction project auditing, a 'look-ahead schedule' is primarily reviewed to assess:
- Historical cost trends
- Near-term work planning and resource availability (Correct answer)
- Long-term contract risk
- Insurance coverage adequacy
Correct answer: Near-term work planning and resource availability
A look-ahead schedule (typically 3–6 weeks) documents near-term work plans and reveals whether resources and materials are being properly coordinated.
Question 5: Which variance threshold trigger should a construction auditor recommend as a best practice for mandatory management reporting?
- Any variance regardless of amount
- Variances exceeding 5–10% of budget or a defined dollar threshold (Correct answer)
- Variances only after project completion
- Variances approved by the contractor
Correct answer: Variances exceeding 5–10% of budget or a defined dollar threshold
A percentage or dollar threshold (commonly 5–10%) ensures significant variances receive management attention without creating noise from minor fluctuations.
Question 6: A construction project auditor detects that baseline schedules have been revised multiple times without documented owner approval. This is an indicator of:
- Efficient project management
- Unauthorized schedule manipulation (Correct answer)
- Normal schedule updates
- Contractor efficiency gains
Correct answer: Unauthorized schedule manipulation
Repeated baseline revisions without owner approval may hide schedule slippage and distort performance metrics.
CCA Construction Project Management and Controls 2
When auditing a construction project's contingency reserve, an auditor should verify that the reserve is: