The role of a CPA in construction is unique as the construction industry is complex and faces various challenges, including financial risks, compliance, and investments. A CPA who is experienced in this field ensures the accuracy and integrity of financial records associated with construction accounting and its regulations. We will dive into the role of a CPA in construction company audits and why companies need them.
Role of a CPA in Construction Auditing
A CPA in construction auditing has a set of responsibilities and functions that play an integral part in the success of a construction project. CPAs in this field issue reports that help companies plan and prepare cost estimates. They examine financial statements, evaluate internal controls, ensure GAAP compliance (Generally Accepted Accounting Principles), and audit reporting. Here is a breakdown of how a construction auditor can help you plan future projects.
- Plan and prepare cost estimates: CPAs in construction are knowledgeable about business operations, financial systems and regulations, and objectives for a construction project. They can prepare a comprehensive review and analysis of the financial statements, including but not limited to lead analysis, audits, and job costing so construction companies gain valuable insights into their financial standing. This information helps construction companies plan and prepare cost estimates before starting a project.
- Examine financial statements: CPAs examine the financial statements for a construction company, including the balance sheet, income statements, and cash flow to analyze and verify the accuracy with GAAP regulations. Furthermore, analyzing and verifying the financial data allows CPAs to provide advice to construction companies to improve business operations.
- Evaluate internal controls: Because construction companies have an internal control system, CPAs can evaluate the system in place to ensure the processes and procedures are effective. Specifically, evaluating internal controls ensure the prevention of fraud and the accuracy of the financial records, including contracts and billing, revenue recognition, and payroll.
- GAAP compliance: The Generally Accepted Accounting Principles (GAAP) is a set of accounting standards and guidelines all CPAs must adhere to when preparing financial statements. GAAP undergoes changes on occasion in response to any accounting issues that arise. As such, a construction CPA firm will have the best knowledge and stay up to date on the best GAAP practices and requirements under the Standards Codification 606 (ASC 606), which sets the standards on revenue for construction-related contracts and projects.
- Auditing reporting: CPAs are qualified to prepare audit reports with an opinion letter stating the fairness and reliability of a company’s financial statements. These audit reports are often required by banks and financial institutions when construction companies and contractors seek loans or credit facilities. It is a way to assure the lenders and shows financial records are accurate and reliable. Audit reports are also essential for demonstrating bond capacity or the ability to pay for projects that are currently a work in progress (WIP).
Based on these responsibilities, the role of a CPA in construction company audits is complex, but their services can facilitate decision-making, provide strategic guidance, and lead to a better financial outlook for your company.
Construction Accounting and Auditing Services
Construction industry accounting and auditing services are highly specialized in this industry, and a knowledgeable CPA in construction is needed to help your company’s projects run smoothly. Construction companies and contractors can take advantage of this service by hiring a CPA firm, such as Assurance Dimensions.
We have a team of skilled construction accounting professionals with accounting and auditing experience ready to serve commercial and residential construction companies, subcontractors, and providers. Contact us today to learn more about our auditor services.
