CCA Audit Methodology and Procedures 2 — Questions and Answers
Question 1: During a construction audit, an auditor discovers that the contractor submitted invoices for materials that were never delivered to the job site. This is best classified as:
- A scheduling discrepancy
- Fraudulent billing (Correct answer)
- A change order variance
- A contract modification error
Correct answer: Fraudulent billing
Invoicing for materials not delivered constitutes fraudulent billing, a serious finding requiring escalation beyond typical audit reporting.
Question 2: Which sampling method is most appropriate when an auditor wants to ensure every item in a population has an equal chance of selection?
- Judgmental sampling
- Stratified sampling
- Random sampling (Correct answer)
- Cluster sampling
Correct answer: Random sampling
Random sampling gives each item in the population an equal probability of selection, reducing selection bias.
Question 3: A CCA auditing a lump-sum construction contract should focus primarily on:
- Unit cost verification and quantity takeoffs
- Contract compliance, scope changes, and allowances (Correct answer)
- Labor productivity ratios
- Equipment depreciation schedules
Correct answer: Contract compliance, scope changes, and allowances
Under lump-sum contracts, the auditor's main focus is verifying that scope changes and allowances are properly authorized and documented.
Question 4: The term 'substantial completion' in construction auditing is significant because it typically triggers:
- Final payment and release of all retainage
- The start of the warranty period and punch-list obligations (Correct answer)
- Owner acceptance of all subcontractor invoices
- Termination of the construction manager's contract
Correct answer: The start of the warranty period and punch-list obligations
Substantial completion marks the point when the owner can use the facility for its intended purpose and starts the warranty and punch-list period.
Question 5: When auditing equipment rental charges on a cost-plus contract, the auditor should compare rental rates against:
- The contractor's in-house equipment policy
- Published industry rate guides such as the AED Green Book (Correct answer)
- The project manager's verbal approval
- The owner's internal maintenance cost records
Correct answer: Published industry rate guides such as the AED Green Book
Industry rate guides like the AED Green Book provide objective benchmarks for verifying that equipment rental charges are reasonable and customary.
Question 6: An auditor identifies that a subcontractor's invoices consistently lack supporting backup documentation. The best immediate audit step is to:
- Disallow all subcontractor costs pending investigation
- Issue a formal audit finding and request documentation from the subcontractor (Correct answer)
- Notify the project owner and halt the project
- Accept the invoices based on the general contractor's approval
Correct answer: Issue a formal audit finding and request documentation from the subcontractor
The auditor should issue a finding and formally request documentation rather than unilaterally disallowing costs without due process.
Question 7: Which of the following best describes 'field verification' in construction auditing?
- Reviewing contracts and payment applications at the auditor's office
- Physically inspecting the job site to confirm quantities, conditions, and progress (Correct answer)
- Confirming contractor credentials with licensing boards
- Verifying payroll records with state labor departments
Correct answer: Physically inspecting the job site to confirm quantities, conditions, and progress
Field verification involves on-site inspection to confirm that reported quantities, installed materials, and construction progress match documented claims.
CCA Audit Methodology and Procedures 2
During a construction audit, an auditor discovers that the contractor submitted invoices for materials that were never delivered to the job site.
This is best classified as: