CCA Ethics, Compliance, and Regulatory Standards 3 — Questions and Answers
Question 1: Under OSHA regulations, which party has primary responsibility for maintaining a safe work environment on a multi-employer construction site?
- The subcontractor with the most workers on site
- Each employer is responsible for its own employees and exposures it creates (Correct answer)
- The local municipality overseeing the project
- The insurance carrier for the general contractor
Correct answer: Each employer is responsible for its own employees and exposures it creates
OSHA's multi-employer citation policy holds each employer responsible for hazards affecting its employees and for hazards the employer creates, controls, or corrects.
Question 2: In construction auditing, the concept of 'independence in appearance' means:
- The auditor must physically be located away from the auditee's offices
- Third parties must reasonably believe the auditor is objective and unbiased (Correct answer)
- The auditor cannot own any stock in any publicly traded company
- The audit team must consist of at least three members
Correct answer: Third parties must reasonably believe the auditor is objective and unbiased
Independence in appearance means that reasonable and informed third parties must not perceive circumstances that would impair the auditor's objectivity.
Question 3: A construction company's employee reports suspected fraud to a federal agency and is subsequently terminated. This termination may violate which legal protection?
- The National Labor Relations Act
- Whistleblower protection provisions under the False Claims Act or SOX (Correct answer)
- The Equal Employment Opportunity Act
- The Occupational Safety and Health Act grievance procedures
Correct answer: Whistleblower protection provisions under the False Claims Act or SOX
Both the False Claims Act and Sarbanes-Oxley contain anti-retaliation provisions that protect employees who report fraud or securities violations.
Question 4: Which contract type creates the greatest ethical risk related to cost inflation by a contractor?
- Firm fixed-price contract
- Cost-plus-percentage-of-cost contract (Correct answer)
- Indefinite delivery/indefinite quantity contract
- Lump sum contract
Correct answer: Cost-plus-percentage-of-cost contract
Cost-plus-percentage-of-cost contracts create a financial incentive to inflate costs since the contractor's fee increases as costs rise.
Question 5: An auditor who accepts a gift from a contractor currently under audit is violating which primary professional standard?
- Confidentiality
- Competency
- Objectivity (Correct answer)
- Due diligence
Correct answer: Objectivity
Accepting gifts from an auditee impairs or appears to impair the auditor's objectivity, which is a core principle of the IIA Code of Ethics.
Question 6: The Sherman Antitrust Act is most relevant to construction auditing when evaluating:
- Labor overtime compliance on federal projects
- Bid rigging and price-fixing arrangements among competitors (Correct answer)
- Material substitution clauses in contract documents
- Insurance certificate verification procedures
Correct answer: Bid rigging and price-fixing arrangements among competitors
The Sherman Antitrust Act prohibits anticompetitive practices including bid rigging and price fixing, which are risks in construction procurement.
Question 7: When a construction auditor discovers a material weakness in internal controls, the proper disclosure is to:
- Notify only the project manager and request a corrective action plan
- Report to senior management and the audit committee or board (Correct answer)
- File a report with the state contractor licensing board
- Document in working papers only without formal reporting
Correct answer: Report to senior management and the audit committee or board
Material weaknesses must be communicated to senior management and those charged with governance, such as the audit committee or board of directors.
CCA Ethics, Compliance, and Regulatory Standards 3
Under OSHA regulations, which party has primary responsibility for maintaining a safe work environment on a multi-employer construction site?