First-time audit preparation
From cash or tax basis records to statements recognizing income when earned and costs when incurred.
For contractors before and between audits
Construction internal audit and audit readiness support
Your surety wants audited statements in the spring and the job costs have not been reconciled since summer. We do the work that gets the file ready before an auditor opens it.
500+
Audit and attestation engagements
AICPA
Peer-reviewed firm
50
States served nationwide
Where construction audit files go wrong
A correction to a work in progress (WIP) schedule can mean restated revenue and delayed fieldwork while your team revises the figures.
Costs coded to the wrong job are invisible in a totals-only reconciliation, because the totals still tie.
Costs and billings can tie to the ledger while the estimated cost to complete is stale, and reported margin is computed from that estimate.
Send us last month's schedule
We will tell you what an auditor is likely to question in it.
Get your WIP schedule reviewedWhat a construction internal audit is
The IIA describes internal auditing, in Domain I of its Global Internal Audit Standards, as independent, risk-based and objective assurance, advice, insight and foresight for the board and management.
In a construction internal audit we review your risks and controls and recommend improvements, and we do readiness work on the records your external auditor will read. Contractors buy the first to run better and the second to get through fieldwork.
We begin both sides of that work with the work in progress schedule, the report in which each job’s contract value, approved change orders, costs to date, estimated cost to complete, percentage complete, revenue to date and over or under billing are set out.
Where the schedule does not agree to the general ledger, the record of every transaction the business has posted, the external auditor has to resolve the difference before testing anything that depends on it. The audit itself, and the opinion a surety or a lender reads, is described on our construction audit services page.
Internal audit and external audit are different jobs
Internal audit
Your company commissions it. The findings are reported to management and to those overseeing the business, and the work can be done at any point in the year.
External audit
Your company engages an independent auditor. The auditor tests your statements and issues an opinion for a surety, a lender or a public owner. Some of that work can begin before the books close.
Whether we can prepare your file and audit it too
Yes, if the conditions are met.
- ET 1.295.040
Nonattest services are work a firm does for a client outside the audit itself. Under ET 1.295.040 a firm can prepare records for an audit client where management assumes responsibility for the work, designates someone with the skill to oversee it, evaluates the results and accepts responsibility for them.
- ET 1.295.050
Under ET 1.295.050 the firm documents that understanding in writing before the work begins. Failing to reach that understanding impairs independence. Failing to document it is a breach of the AICPA’s compliance with standards rule (ET 1.310.001).
- Paragraph 3.88
Under Government Auditing Standards, paragraph 3.88 of the 2024 Yellow Book, preparing a client’s financial statements in their entirety from its trial balance or records is a significant threat to independence.
- Paragraph 3.69
The firm has to document the threat and the safeguards applied, such as keeping the preparers off the audit team (paragraph 3.69), or decline the work.
- ET 1.295.150
For internal audit work, the AICPA permits a firm to assist an audit client where management keeps responsibility for the function, including its scope and its decisions (ET 1.295.150).
- Paragraph 3.96
Under the Yellow Book, setting internal audit policy, performing control procedures or determining the function’s scope impairs independence (paragraph 3.96).
What each side of the work covers
Risk and control review
Process walkthroughs
Bidding, procurement and billing, with the people who run them.
Control gap ranking
Which gaps matter, and which one an auditor would raise first.
Written recommendations
What to change, in the order it is worth changing.
Records readiness
WIP schedule reconciliation
We tie costs and billings to the ledger and check cost to complete.
Job cost coding review
We find costs booked to the wrong job before they are reported in a margin report.
Contract, change order and retainage files
We agree scope, pricing and withheld amounts to the contracts.
- Retainage
- Retainage is the share of a contract a customer holds back until the job closes.
- Over and under billing
- Over and under billing is the gap between what you have earned on a job and what you have invoiced for it.
- An unpriced or unapproved change order
- An unpriced or unapproved change order that is enforceable is estimated and included in contract value to the extent it is probable that a significant reversal will not occur; approval is evidence for that judgment.
How a readiness review runs
Scope and sample
We agree which jobs to look at, by size, risk or how recently they moved.
Reconcile
We reconcile the schedules and investigate the differences that affect the review.
Walk through
We trace selected transactions through the process with the staff responsible.
Report and hand over
We rank findings by what an external auditor would raise first.
Contractors who need a review or readiness work
Ongoing control review
Contractors who want the risk and control work done on a cycle, between audits as well as before them.
Preparation when another firm audits you
We do the readiness work and your existing auditor issues the opinion.
The construction audit checklist we work from
Ask for the construction audit checklist we use on this work. We build it backwards from the request list an auditor sends, so you can work it yourself if you would rather.
Request the readiness checklistWhat changes the size of the work
We scope a construction internal audit and a readiness review separately, and we price each against your file. The same factors apply to both:
Published ranges for the audit itself are on the construction audit services page.
How many jobs are open, and how many go into the sample
Whether the records are on a cash or an accrual basis at handover
How many entities and how many accounting systems are involved
Whether the prior year schedules were ever reconciled
Whether the work has to land before a fixed surety or lender date
We always had a 24-hour rule at the company. And really, if you ask me, it's a same day rule. The same day rule means that if you contact us and you're a client, you'll get a response that day, worst case, within 24 hours.
Related audit services
- Construction audit servicesThe audited statements a surety, lender or public owner asks for.
- Agreed-upon proceduresA scoped report from a CPA firm answering one specific question.
- Accounts payable auditDuplicate payments, vendor files and payment controls.
This is general information and not advice for your circumstances. What a contractor needs, and whether one firm can do both pieces of it, depends on that contractor’s own facts, so speak to a CPA before acting on it.
Talk to us before fieldwork starts
A contractor with an audit due in March and a schedule untouched since the autumn still has options in January. The earlier the call, the more of them are open.
Send your last work in progress schedule, your trial balance, the summary of every ledger account, and the date your surety or lender is working to. We will tell you what the file is missing.
Contact
Connect with Dimov Audit
Our dedicated team is ready to assist you on your path to financial success.
Email
hello@dimovaudit.comPhone
855-622-9009New York Office
24 Mercer St, 2nd Floor, Suite 214
New York, NY 10013
United States
Reviewed by George Dimov, CPA. Dimov Audit works with contractors across all 50 states.
Are your financials audit-ready?
Are Your Financials Audit-Ready?
At Dimov Audit, we pride ourselves in quick communication, accurate work, and seamless delivery.