The construction industry comes with many advanced accounting issues, audit procedures, and tax issues, which makes construction contractor engagements inherently higher risk than other engagements. As a result, practitioners and financial professionals should be prepared to address difficult issues such as look-back calculations, measuring progress of contracts, overhead allocations, and internal controls for construction contractors.
In this book, some of the most pervasive issues in the construction industry and how to identify and manage the risks inherent in construction contractor engagements are discussed.
This book shows how to:
- Apply complex accounting and financial reporting standards to construction contractors.
- Evaluate and rework audit processes to avoid common deficiencies in construction engagements.
- Identify tax compliance issues unique to the construction industry.
Table of Contents
Chapter 1 1-1
Nature and Significance of the Construction Industry 1-1
Types of Contractors 1-2
Players in the Industry 1-3
Types of Contracts 1-4
The Role of the Surety 1-5
Contract Accounting 1-7
Additional Resources for the Construction Industry 1-10
Summary 1-11
Chapter 2 2-1
Strategic Planning for the Construction Contractor 2-1
Chapter 3 3-1
Internal Controls for the Contractor 3-1
What Are Internal Controls 3-3
Controls Specific to Construction Contractors 3-4
Summary 3-26
Chapter 4 4-1
Fraud and the Contractor 4-1
AU-C Section 240, Consideration of Fraud in a Financial Statement Audit 4-3
Identification of Certain Fraud Risks 4-5
Mitigating Fraud as a Construction Contractor 4-12
Summary 4-20
Chapter 5 5-1
Cash Management for the Contractor 5-1
Sources of Cash for the Contractor 5-3
Contractor Cash Flow 5-4
Summary 5-15
Chapter 6 6-1
Accounting for Joint Ventures 6-1
The Joint Venture 6-3
Accounting for a Joint Venture 6-5
The Joint Venture Agreement 6-6
Method of Organization 6-7
Members Ownership Percentage 6-9
Method of Accounting for the Member 6-10
Disclosures by Members of Joint Ventures 6-12
Impact of Joint Ventures Due to FASB ASC 460, Guarantees 6-13
Impact of FASB ASC 810, Consolidation 6-14
Summary 6-17
Chapter 7 7-1
Benchmarking the Contractor 7-1
Financial Benchmarking 7-3
Healthy Contractor Benchmarks 7-9
Non-Financial Benchmarking 7-11
Summary 7-14
Chapter 8 8-1
Construction Cost Allocations 8-1
Components of Job Costs 8-2
The Impact on Estimators and Project Managers 8-13
Selling, General, and Administrative Costs 8-15
Summary 8-18
Chapter 9 9-1
Assisting the Financially Troubled Contractor 9-1
Why Contractors Are Prone To Failure 9-3
Warning Signs for Potential Business Failures 9-5
Saving the Financially Troubled Contractor 9-6
Go From Attitude to Action 9-8
Summary 9-11
Chapter 10 10-1
Audit Risks of a Contractor 10-1
Audit Risk and the Audit Risk Model 10-2
Contractor Audit Risk Areas 10-4
Warning Signs for the Auditor 10-19
Applicability to a Review Engagement 10-21
Summary 10-22
Chapter 11 11-1
Deferred Income Taxes 11-1
Permanent and Temporary Differences 11-4
The Use of Enacted Tax Rates 11-7
Accounting for Uncertainty in Income Taxes Under FASB ASC 740 11-9
Summary 11-10
Chapter 12 12-1
Alternative Minimum Tax Considerations for Contractors 12-1
Exemptions from AMT 12-2
Calculation of the AMT 12-5
Minimizing the Minimum Tax 12-7
Summary 12-10
Chapter 13 13-1
Look-Back Method 13-1
Reporting the Calculation 13-3
The Computation of the Look-Back Calculation 13-10
Summary 13-21
Chapter 14 14-1
Tax Planning for the Contractor 14-1
Financial Analysis 14-3
Tax Planning Process 14-5
Summary 14-11
Appendix A A-1
The New Revenue Recognition Standard: FASB ASU No. 2014-09 A-1
Appendix B B-1
The New Leases Standard: FASB ASU No. 2016-02 B-1
Glossary Glossary 1
Index Index 1
Solutions Solutions 1
Chapter 1 Solutions 1
Chapter 2 Solutions 2
Chapter 3 Solutions 3
Chapter 4 Solutions 4
Chapter 5 Solutions 5
Chapter 6 Solutions 6
Chapter 7 Solutions 7
Chapter 8 Solutions 8
Chapter 9 Solutions 10
Chapter 10 Solutions 11
Chapter 11 Solutions 12
Chapter 12 Solutions 13
Chapter 13 Solutions 14
Chapter 14 Solutions 15
