CCA CCA Subcontractor and Vendor Management Auditing

Question 1

When auditing a general contractor's subcontractor selection process on a public construction project, which practice would most likely constitute a compliance violation?

Accepted Answer

Awarding a subcontract to a related-party firm without competitive bidding or disclosed relationship

Answer

Awarding subcontracts to related parties without disclosure and competitive process violates most public procurement integrity requirements and creates a conflict of interest.

Question 2

A CCA auditor reviewing subcontractor invoices finds that the GC consistently approves and pays subcontractor invoices within 48 hours without any field verification. This practice most likely indicates:

Accepted Answer

Absence of required receiving, inspection, and verification controls over subcontractor payments

Answer

Immediate payment without field verification bypasses the controls designed to confirm that work was actually performed before payment is authorized, creating significant overpayment risk.

Question 3

Which document is most critical for an auditor verifying that a subcontractor performed the work they were paid for on a unit price subcontract?

Accepted Answer

Field-measured quantity take-off reports signed by the owner's inspector

Answer

On unit price subcontracts, independent field quantity measurements by the owner's inspector are the only reliable evidence that the billed quantities were actually installed or constructed.

Question 4

What is pass-through billing in the context of construction subcontractor auditing, and why is it a concern?

Accepted Answer

A GC billing the owner for subcontractor costs plus unauthorized markups beyond contract-permitted rates

Answer

Pass-through billing fraud involves the GC applying unauthorized overhead and profit markups to subcontractor invoices before billing the owner, exceeding the markup rates allowed by the prime contract.

Question 5

During a subcontractor audit, an auditor discovers that 30% of payments to a key subcontractor were made by checks payable to the subcontractor's owner personally rather than to the subcontractor entity. This finding suggests:

Accepted Answer

Potential diversion of project funds and tax reporting irregularities

Answer

Payments to an individual rather than the corporate entity create risk of fund diversion, complicate lien waiver enforcement, and suggest potential tax evasion or fraud.

(CCA) Certified Construction Auditor Practice Test

(CCA) Certified Construction Auditor Practice Test

CCA CCA Subcontractor and Vendor Management Auditing