CCA Construction Internal Controls and Financial Reporting 1

Question 1

What internal control framework is most commonly referenced in construction audit engagements?

Accepted Answer

COSO Framework

Answer

The Committee of Sponsoring Organizations (COSO) framework is the most widely referenced internal control framework used in audit engagements, including construction audits.

Question 2

Which component of the COSO framework addresses organizational structure and the assignment of authority and responsibility?

Accepted Answer

Control Environment

Answer

The Control Environment component of COSO encompasses the organization's ethical values, management philosophy, organizational structure, and assignment of authority and responsibility.

Question 3

In construction auditing, a Work-in-Progress (WIP) schedule is primarily used to:

Accepted Answer

Assess the financial status of contracts currently in progress

Answer

A WIP schedule provides a snapshot of the financial status of active construction contracts, showing billed versus earned revenue and cost incurred versus estimated total cost.

Question 4

Which of the following is an example of a preventive control in a construction company's disbursement process?

Accepted Answer

Requiring dual signatures on checks above a dollar threshold

Answer

Requiring dual signatures on checks is a preventive control because it stops unauthorized disbursements before they occur, rather than detecting them after the fact.

Question 5

Under the percentage-of-completion method in construction accounting, revenue is recognized based on:

Accepted Answer

The proportion of contract costs incurred to date relative to total estimated costs

Answer

Under the percentage-of-completion method, revenue is recognized proportionally based on costs incurred to date divided by total estimated contract costs, matching revenue to work performed.

(CCA) Certified Construction Auditor Practice Test

(CCA) Certified Construction Auditor Practice Test

CCA Construction Internal Controls and Financial Reporting 1