Procedures for a Construction Audit
In a construction audit, its process is not just a cursory assessment. Its purpose is to make sure that the construction company complies with the specifications and guidelines to include the reviews in the pre-construction and planning stages. A thorough construction audit allows the auditors to provide well-organised reviews on the process of construction. Also, the audit will concentrate mainly on keeping the cost of the project within the company’s budget (Also see What is Capital Budgeting?) .
Besides, risk management planning is an extra element in the checklist of a construction audit. This includes ensuring strong financial control, implementing the best practices in the industry, as well as monitoring the invoices of the construction company. Risk management ensures that the project auditors can prevent the project from getting over-budget, since the elevated risks may result in a substantial increase in the costs. As your business continues growing, engaging the services from an audit firm in Johor Bahru is vital as doing so helps you in meeting the demands of your customers and investors.
Launching the Projects
It would be best if your business could select an auditor at the planning stage of a major construction project to maximise the oversight and input from a third-party. You should do so, particularly if you are dealing with a new form of project or a major building investment. If you start engaging the auditors at the beginning, they can set up policies about extra expenses, compliance, as well as the invoicing system. Besides, it allows the auditors to assess the areas with potential problems, for example, the high-risk elements, in the construction plans. Thus, they can make adjustments to reduce or remove the risks (Also see Introduction to Audit Risks). A suitable example will be having decorative elements like glass walls in a building. Apart from being too expensive, it may also increase structural support issues and the risks of installation mistakes, and this is what the auditors should consider.
Procedures for Construction Audits
The construction audit procedures have a close relationship with the scope of the audit services and time frame a company engages the audit firm for the assessment. Once the construction process starts, the auditors will continue monitoring the construction and billing costs to ensure that the progress of the project is the same as their plan and does not go over-budget. Besides, they may examine the construction site and look for ways to enhance the efficiency of the building process. They may also make some adjustments to tackle with some outside factors, for example, the condition of the weather or delays due to the compliance with local building regulations. In most of the situations, it is the responsibility for the contractors to direct the worksite and make the adjustments needed. However, the external auditors (Also see The Audit Objective of External and Internal Audit) will help in confirming whether the contractors and engineers are making the correct decisions when they redirect their efforts to another area that may cause the costs of the project to increase.
Structural Reviews on the Projects
The main focus of a construction audit is the company’s finances, safety and the elements in construction since these factors may influence the monetary elements of the projects. Thus, auditors may inspect the materials and the finished areas of a project to make sure that the construction company upholds all the elements in the contract. For instance, an assessment may help the auditors to discover that the company has used a cheaper type of woods than what the billing and contract have specified for the beams. Such an examination also helps in revealing that the company did not build the delivery ramp with the slope, which helps in loading and unloading the goods effectively. Also, independent inspectors will perform more comprehensive reviews about the technical elements of the building. After that, municipal code enforcement officers will conduct the final assessment before issuing the license.
The Advantages of Having a Construction Audit
The auditors help to ensure that the building projects are progressing on time. Delays will often result in extra costs as the construction company needs to extend the contract term. Thus, proper time management plays a vital role. As the construction company aims to ensure that the project cost remains low from the beginning and complete the project properly at a time, it is an excellent investment for the company to pay for engagement with the auditors to have a construction audit. Besides providing the company with guidance in construction audit, an excellent audit firm will also include additional services within the quoted price. Apart from the auditing services, some firms may offer cost segregation studies for the projects. These studies will aid you in reclassifying the assets of your business for more tax savings (Also see Top Signs You Need To Hire a Tax Accountant) and faster depreciation.