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Audit of Construction Projects Case Study

The document provides information on two ongoing construction projects, Project A and Project B, that the internal audit department must evaluate to prioritize which to audit first with their limited resources. Project A is on budget and on schedule but has potential unapproved change orders of $10 million and a high number of requests for information. Project B has a larger size and budget underrun but is behind schedule and pioneering new technology. The auditor must develop an evaluation method to recommend the higher priority project to audit and explain the decision to management.

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190 views

Audit of Construction Projects Case Study

The document provides information on two ongoing construction projects, Project A and Project B, that the internal audit department must evaluate to prioritize which to audit first with their limited resources. Project A is on budget and on schedule but has potential unapproved change orders of $10 million and a high number of requests for information. Project B has a larger size and budget underrun but is behind schedule and pioneering new technology. The auditor must develop an evaluation method to recommend the higher priority project to audit and explain the decision to management.

Uploaded by

cyrosemt
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Audit of Construction Projects Case Studies

I. Construction Project Audit Prioritization

You have been tasked by your Internal Audit Department to evaluate and recommend which audit construction project to prioritize given
the limited resources in your organization. This is the first time that your department would be auditing construction projects. As such,
there is currently no established process to evaluate construction projects. There are currently two construction projects ongoing and
you need to evaluate and recommend which project should be prioritized. Constraint is you can only one project at a time as your
organization has a limited number of auditors in your team. For this, you would need to develop an evaluation method i.e. points system
to justify your recommendation.
You have been provided the profiles of each construction project for relative comparison. You are to prepare a recommendation to your
Chief Audit Executive which construction project to audit first. In your proposal presentation, you would need to explain how you made
the decision and why you are prioritizing one project over the other.

CONSTRUCTION PROJECT A

ATTRIBUTE TYPE ATTRIBUTE

Size of Project Php 150 Million

Value of Owner Change Orders Php 13 Million (or 8.7%)

Number of Subcontractor Change Orders 86

Type of Agreement Lump Sum

Budget Over

Schedule On-Track

Number of RFIs 313

% of CDs Complete at Groundbreaking 100%

Fast-Track Project No

Pioneering Project No

Note: For Construction Project A, though not documented, you have also noted that there are potential claims from the contractor and
there are Php 10 Million in Change Orders which have not been approved over 90 days.

CONSTRUCTION PROJECT B

ATTRIBUTE TYPE ATTRIBUTE

Size of Project Php 324 Million

Value of Owner Change Orders Php 15.2 Million (or 4.7%)

Number of Subcontractor Change Orders 124

Type of Agreement GMP with shared savings

Budget Under

Schedule No

Number of RFIs 112

% of CDs Complete at Groundbreaking 65%

Fast-Track Project Yes

Pioneering Project Yes


II. Construction Project Audit Preparation

The Internal Audit Department has already decided on which construction project to audit. The next challenge facing you as the Auditor
in Charge is that your audit team only performed ongoing construction audits but have never audited architectural firms before nor have
they audited the construction design stage before. As such, you will need to develop an interview guide to help new auditors cover the
essential questions.

What do you think are the important questions which need to be covered when you interview the The Architectural Firm/The Architect?

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