Construction inspection
A construction audit provides independent and objective testing and advisory services for the respective building owner, which are geared towards creating added value and avoiding additional costs and in this way improving the construction processes. It supports the organization in achieving its goals by using a systematic and targeted approach to assess the effectiveness of risk management, the internal control system and the management and monitoring processes and help improve them.
Construction auditing is a sub-area of the internal auditing area , for which, in addition to business management knowledge, engineering training is usually required. When carrying out a construction inspection, the test not only covers cost aspects, but also includes deadlines, quality and other technical test areas.
With their work, building advisors also play a leading role in the fight against white-collar crime in the upstream and downstream support of construction projects.
A distinction can be made between non-building and non-building companies: Non-building companies are those that, due to their activity, carry out building projects without building being one of their core competencies.
With these companies, the risk of having to bear excessive costs or of becoming a victim of criminal offenses is significantly higher due to internal controls not being in place in the construction sector as planned. Such companies and organizations can come from different industries:
- Cities and communes,
- Municipal utilities,
- Airports,
- Hospitals and clinics,
- DIY stores and DIY chains,
- Other manufacturing and service companies.
In contrast, construction companies are those where the handling of construction projects is part of day-to-day business, such as property developers. They therefore have more extensive internal controls for construction projects.
Audit and advisory approaches for a construction inspection
A construction project starts with the wishes of a client and ends with the handover of the finished property to him. Implementation requires a very complex project and construction process, in which not only financial, commercial, legal and structural problems have to be solved, but also the numerous participants have to be coordinated and their performance monitored.
Building owners often delegate their functions, duties and responsibilities as well as the planning services and construction work required for the building project, in whole or in part, to third parties. This also includes important control and monitoring tasks.
Because building owners often have no specialist building knowledge, there are very different expectations that they have of a construction project:
- Support services in the form of advice on individual questions,
- Implementation of revision audits,
- Special forensic investigations,
- Consulting services in the field of construction,
- Services to set up your own construction vision,
- Training measures for the department or internal auditing.
Eight test fields can be shown with which the entirety of the processes in construction can be covered by testing:
- Project management,
- Tendering and awarding of architectural and engineering services,
- Implementation of planning services,
- Tendering and awarding of construction works,
- Construction,
- Change management including addendum management,
- Billing of planning and construction services including all supplements,
- Acceptance of planning and construction services.
Further subdivisions are possible within these audit areas, namely into individual business areas or processes, such as purchasing or invoice auditing. A professional construction department develops appropriate test programs for all of these test fields. This also applies to possible combinations of the test fields (e.g. contract or claim management).
example
A non-construction company receives from its architect the template for comprehensive maintenance measures on a listed property. The property is to be rededicated in terms of use and will be used as an office building after the renovation.
The client is not sure whether he actually needs the scope of the renovations and whether the planned budget is realistic. In addition, he cannot assess whether the plans contain additional risks that would lead to supplements and thus inevitably to significant overruns of the budget. He instructs a building consultant to review the planning documents and ask for an assessment of the inherent risks. The task of a construction audit is to examine the entire construction process from project development to handover of use to the client. It can also only be a question of individual problems, the construction process in particular, or project management. Here, a special focus is placed on the area of the internal monitoring system as well as on the necessary internal controls, which should lead to an economical and orderly execution of all construction processes.
During an inspection by the building inspection, the weak points and risks of the entire process are analyzed and determined under the aspects of correctness, economic efficiency, risk and security. Further examination aspects can be taken into account, but in practice, in our experience, play a rather subordinate role.
From this analysis, possible potentials for improvements are derived and implemented in a new improved process. Depending on the audit approach (ex ante, ad hoc or ex post), the identified potential savings and process optimization can be implemented in the current or in a future project. Despite the risk-oriented audit approach, the audit itself is always carried out from the construction perspective. This means that the construction planning and, above all, the construction process are in the foreground. This essentially involves compliance with the relevant technical regulations and whether the client's objectives (construction description, defined costs, deadlines and qualities) are or have been implemented accordingly. Commercial (e.g. prices, billing) and legal aspects (e.g. contract drafting, claims) often play a very important role. If these aspects are not taken into account, this would inevitably result in an insufficient test with correspondingly negative results.
Forensic exams
Construction projects are not an everyday business, especially for so-called non-construction companies. The project character is often evident in the uniqueness of the construction project. A company usually only builds an office building for the head office or a new production hall once. Even a plant abroad is often only created once and then only maintained later. The general risk factors that favor women, such as a long distance from the parent company, also apply to construction projects in these cases.
If the existing internal control system is fundamentally too weak or if it has significant gaps, this is a possibility for internal or external perpetrators to commit criminal offenses.
Example: A company based in Starnberg commissioned renovation work. The payment was made by an employee who has worked in accounting for several years. But a total of almost half a million euros did not end up in the accounts of the craftsmen and construction companies, but in the accounts of two friends of the accountant. The trio of women then took care of cash withdrawals and transfers that the money came into the accountant's area of disposal. What it was spent on is unknown.
The defense against fraudulent acts is carried out by internal controls, which in this context can be broken down into the three main processes of prevention, detection and processing. The internal audit takes a leading role in the area of detection.