Managing a Construction Audit
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Speaker : DENISE CICCHELLA
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When : Tuesday, August 20, 2024
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Time : 01 : 00 PM EST
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Denise Cicchella is a recognized expert in construction audit, protecting owners from the overpayment of construction costs due to error, negligence or fraud.
Dense is a Certified Internal Auditor, Certified Fraud Examiner, Certified Construction Auditor, Project Management Professional and Fellow of the
Life Management Institute. She holds an MBA in International Business from Fairleigh Dickinson University and a BBA in Accounting from Loyola University. She is the Founding President of the New York/New Jersey Chapter of the National Association of Construction Auditors. She has audited and led audit teams for small construction project as well as multi billion dollar projects.
She is an experienced trainer and can often be seen teaching domestically and internationally.
She has written 3 books on the topic of construction audit.
Managing a construction audit requires a unique approach due to the complexities inherent in construction projects. Unlike other audits, such as financial audits or compliance audits, construction audits involve evaluating a wide range of factors specific to the construction industry, including project management, contractual agreements, change orders, materials management, and regulatory compliance. In this class, we'll explore how to manage a construction audit effectively and why it differs from other types of audits.
Understanding the Construction Audit Process
- Define Audit Objectives: Begin by clearly defining the objectives of the construction audit. Determine what aspects of the project will be audited, such as compliance with contractual agreements, adherence to project schedules and budgets, quality of workmanship, and regulatory compliance. How much of these factors will be audited. It has to be determined what the scope for the audit will be and how findings will be delivered. Unlike a typical audit where the process happens over and over again, this may be the companies only construction project and waiting to deliver findings may be problematic for a multitude of reasons.
- Plan Audit Activities: Develop a detailed audit plan outlining the scope of the audit, audit procedures, timelines, and resource requirements. Identify key stakeholders and establish communication channels to coordinate audit activities effectively. Many of the audit activities involve just observation so it is hard to manage time commitment and some time management may be outside the realm of control of the auditor assigned.
- Collect Documentation: Gather relevant documentation related to the construction project, including contracts, change orders, invoices, payment records, progress reports, inspection reports, and correspondence. Organize the documentation in a systematic manner for easy reference during the audit.
- Conduct Fieldwork: Conduct on-site visits to inspect construction activities, verify the accuracy of documentation, and interview project personnel and stakeholders. Evaluate the quality of workmanship, adherence to project specifications, and compliance with safety and environmental regulations. Conducting fieldwork – such as site conditions – entail advance participation to the auditors as they need to be educated and prepared for site safety requirements (hard hat, specific boots, medication restrictions, physical ailments.)
- Analyze Findings: Analyze the information collected during fieldwork to identify any discrepancies, deviations from contractual requirements, or areas of concern. Assess the impact of findings on project outcomes, such as cost overruns, schedule delays, or quality deficiencies.
- Communicate Results: Prepare audit reports summarizing the findings, conclusions, and recommendations resulting from the audit. Clearly communicate the results to project stakeholders, including project owners, contractors, subcontractors, and regulatory authorities.
- Follow Up and Monitor: Monitor the implementation of audit recommendations and follow up on any outstanding issues or corrective actions. Track project progress to ensure that identified deficiencies are addressed promptly and effectively.
Key Differences from Other Audits - Project-Based Nature: Unlike other audits that focus on financial records or compliance with regulations, construction audits are project-based and involve evaluating the performance of construction projects from inception to completion.
- Complexity of Construction Projects: Construction projects are inherently complex, involving numerous stakeholders, intricate contracts, multiple phases, and diverse activities. Managing a construction audit requires a deep understanding of construction processes, materials, methods, and regulations.
- Dynamic Environment: Construction projects are subject to constant changes, including design modifications, scope adjustments, and unforeseen challenges. Managing a construction audit requires flexibility and adaptability to accommodate changes throughout the project lifecycle.
- Contractual Considerations: Construction audits involve evaluating compliance with contractual agreements, change orders, and project specifications. This requires a thorough understanding of contract terms, legal requirements, and industry standards.
- Risk Management Challenges: Construction projects are inherently risky, with potential risks related to safety, quality, environmental compliance, legal liability, and financial performance. Managing a construction audit involves identifying, assessing, and mitigating these risks to protect project interests.
- Technical Expertise Requirements: Conducting a construction audit requires access to qualified auditors with the technical expertise and industry knowledge necessary to evaluate construction activities effectively.
- Multi-Party Coordination: Construction audits require collaboration and coordination with various parties, including project owners, contractors, subcontractors, suppliers, architects, engineers, and auditors. Managing communication and relationships among these stakeholders is essential for a successful audit outcome.
Conclusion
Managing a construction audit requires a unique approach due to the complexities inherent in construction projects. By understanding the construction audit process and its key differences from other audits, auditors can effectively evaluate project performance, ensure compliance with contractual agreements, and mitigate risks to achieve successful project outcomes. With proper planning, communication, and coordination, construction audits can provide valuable insights and recommendations for improving project management practices and enhancing project succes
Areas Covered
- Analyze how to set up a time budget for the construction audit.
- To realize the changes in results and actions around the timing of reports.
- To discuss the contractual limits of auditing a project.
Course Level - Basic
Who Should Attend
Auditors, construction auditors, audit management, project management
Why Should You Attend
- Complexity of Projects: Construction projects involve numerous stakeholders, intricate contracts, multiple phases, and diverse activities. Managing an audit requires understanding the complexities of the project, including its scope, schedule, budget, and contractual arrangements.
- Voluminous Documentation: Construction projects generate vast amounts of documentation, including contracts, change orders, invoices, receipts, drawings, and correspondence. Managing a construction audit involves collecting, organizing, and analyzing this documentation to ensure compliance with contractual requirements and regulatory standards.
- Contractual Ambiguities: Construction contracts often contain complex provisions, ambiguous language, and conflicting terms. Managing an audit requires interpreting and applying contract terms accurately to assess compliance, identify potential risks, and resolve disputes effectively.
- Coordination with Multiple Parties: Construction audits require collaboration and coordination with various parties, including project owners, contractors, subcontractors, suppliers, architects, engineers, and auditors. Managing communication and relationships among these stakeholders is essential for conducting a thorough and impartial audit.
- Scope Creep and Change Orders: Construction projects are susceptible to scope creep, changes in project scope, and numerous change orders throughout the project lifecycle. Managing an audit requires tracking and evaluating these changes to ensure they are properly documented, approved, and accounted for in project costs.
- Budget and Schedule Pressures: Construction projects often face budget constraints and schedule pressures, leading to cost overruns, delays, and quality compromises. Managing an audit involves assessing the impact of budget and schedule deviations on project outcomes and identifying opportunities for improvement.
- Technical Expertise Requirements: Construction audits require a deep understanding of construction processes, materials, methods, and regulations. Managing an audit requires access to qualified auditors with the technical expertise and industry knowledge necessary to evaluate construction activities effectively.
- Risk Management Challenges: Construction projects are inherently risky, with potential risks related to safety, quality, environmental compliance, legal liability, and financial performance. Managing an audit involves identifying, assessing, and mitigating these risks to protect project interests and ensure compliance with regulatory requirements.
- Legal and Regulatory Compliance: Construction audits must comply with legal and regulatory requirements, including contract laws, accounting standards, tax regulations, and industry-specific regulations. Managing an audit requires staying updated on relevant laws and regulations and ensuring compliance throughout the audit process.
- Time and Resource Constraints: Conducting a comprehensive construction audit requires significant time, resources, and expertise. Managing an audit involves allocating resources efficiently, setting realistic timelines, and prioritizing audit activities to achieve audit objectives within budget and schedule constraints.
In summary, managing a construction audit is challenging due to the complexity of construction projects, voluminous documentation, contractual ambiguities, coordination with multiple parties, scope creep, budget and schedule pressures, technical expertise requirements, risk management challenges, legal and regulatory compliance, and time and resource constraints. Effective management of a construction audit requires careful planning, communication, coordination, and expertise to ensure a thorough, impartial, and successful audit outcome.
Topic Background
Managing a construction audit can be challenging due to various factors inherent in the construction industry and the complexity of construction projects. Some of the reasons why it's hard to manage a construction audit include the length of time the audit lasts, the commitment of hosting an auditor with the project for an extended time, the volume of paperwork, and ensuring you have the talent to perform the audit.
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$160.00
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