According to the Royal Spanish Academy, an audit consists of the systematic review of an activity or a situation to assess compliance with the rules or objective criteria to which they must submit.
Basically, it is a review of a company’s accounts or, in this case, verification of the money invested by a company in a project.
From a ‘simple’ work carried out by a city council in our country, to large projects such as Elon Musk’s in Berlin (The Berlin-Brandenburg Giga), audits play a fundamental role in reviewing the proper execution of these constructions.
Thus, if you wonder what a construction audit is, the auditors have the job of ensuring compliance with the contract signed by the clients and the construction companies.
It has been many years since scams and embezzlements have touched our lives. Some have suffered this type of crime in their own flesh, while others suffer it indirectly.
Whether due to poor management of municipal, state or regional works; many of us have been victims indirectly, of breaches of contracts by third parties in the works of our community.
Regarding the breach of contracts, we are not referring only to the miscalculation of the term that the work would last; instead, to the acquisition of unsuitable or cheaper materials, differing from what was reflected in an initial contract.
Construction audit procedures and methods
There are several processes to audit in a work; At first instance, the auditors can verify the agreements made by both parties in the contract.
Regarding the examples of the agreements are: The duration (in days, months or years), the costs, the initials paid, proposed budgets.
In the same way, the calculation of the development of the project is very important in an audit, thus, a tentative date can be given as the project takes shape.
In some contracts, payment by installments is established depending on the development of the work, in this way, by calculating either visually or in numbers, how much the work has progressed, cash advances can be given.
One of the ways to calculate this progress is by counting the existing material in the work, as well as interviews with laborers and construction managers.
The auditors can consult the invoices for materials used in the work and review the cost proposed for said materials in the contract.
Another audit can be carried out at the end of the work, verifying that the value of the asset is equal to that of the materials used.
In this way, it can also be verified if any extra expense was necessary or, instead, if the use of any material was omitted or substituted.
Why should there be an audit?
As you could notice throughout the article, audits are extremely important throughout the development of a work.
The start of a new work either with public money or with private investment; it brings with it the following of certain guidelines for its good development.
If at any time, there is a breach of any point of the contract; the company could face million-dollar fines and even the suspension of the corresponding license.
Let’s take the following example: A bridge is built between two cities; and the company that takes the contract is characterized by its speed in building the work, however, what not everyone knows is the way they build.
This company can use material of lower value than recommended and even acquire products that do not fulfill the required function. However, if there is no audit, the work takes place.
Everything was done ‘successfully’ and cars and people pass through the bridge every day. But, the day comes, the bridge no longer resists and collapses, leaving multiple injuries as well as material damage.
If there was an audit before, during and at the end of said work, this type of problem could be avoided to a great extent.
With this example of a public works audit, and all of the above, we hope you understand the importance of construction project audits.