Audit Methodology and Procedures Flashcards
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Read the first 7 Audit Methodology and Procedures flashcards as text
In a cost-plus-fee contract audit, the auditor's primary concern regarding indirect costs is:
Answer: Whether indirect costs are appropriately allocated and within agreed overhead rates
Auditors must verify that indirect costs are allocated using agreed-upon rates and that only allowable, allocable costs are charged to the project.
Which document is the primary basis for verifying that a contractor's labor costs on a prevailing wage project are compliant?
Answer: Certified payroll reports
Certified payroll reports are the legally required documentation that demonstrates workers were paid at least the prevailing wage rate for their classification.
An auditor finds that a contractor charged the same employee's labor costs to three different projects simultaneously for the same time period. This is an example of:
Answer: Double-billing or cost allocation error
Charging the same labor costs to multiple projects for the same time period constitutes double-billing, whether intentional or due to an accounting error.
The purpose of a 'schedule of values' in construction contract administration is to:
Answer: Provide a breakdown of the contract sum assigned to project components for progress billing
The schedule of values allocates the contract sum among work items and serves as the basis for evaluating monthly progress payment applications.
When reviewing change orders during a construction audit, which red flag most warrants further investigation?
Answer: A high volume of change orders for work that falls within the original contract scope
Change orders for work within the original contract scope may indicate scope creep manipulation or an attempt to bill separately for already-included work.
Which analytical procedure is most useful for detecting unusual patterns in contractor billing on a long-term project?
Answer: Trend analysis comparing monthly billings to project progress curves
Trend analysis comparing billing patterns to actual physical progress can reveal front-loading, billing acceleration, or unsupported cost spikes.
Under the FAR (Federal Acquisition Regulations), which cost is explicitly unallowable in a government construction contract?
Answer: Advertising and public relations costs not related to the contract
FAR Part 31 explicitly identifies advertising and promotional costs unrelated to the contract as unallowable and non-reimbursable.