Internal Control Questionnaires for Construction Companies
•
3 likes•4,743 views
Risk assessment and plugging them is key to the success of business processes. Construction companies are exposed to many kinds of risks. Correct identification of these risks is necessary for the management of such risks. We have prepared these risk assessment questionnaires from the perspective of construction companies. The coverage of issues is adequate. Hopefully, these questionnaires will be helpful in plugging key risks and drive successful business operations of construction companies. We welcome comments for improvements. Thank you.
Report
Share
Internal Control Questionnaires for Construction Companies
- 1. Internal Control Questionnaires Construction Company Ahmad Tariq Bhatti FCMA (Pak), ACMA (UK), CGMA, FPFA, MA (Eco.), BSc
- 2. (1/38) Contents 1. General Issues.............................................................................................................................................2 2. Strategic Business Risks Management...................................................................................................3 3. Operating Risks Management.................................................................................................................5 4. Quality Management Systems (QMS)....................................................................................................7 5. Document Controlling and Handling.....................................................................................................8 6. Contract Order and Management ..........................................................................................................9 7. Communication Systems ........................................................................................................................10 8. Customer Satisfaction.............................................................................................................................10 9. Project Design and Design Control.......................................................................................................11 10. Tendering and Accepting a Project..................................................................................................12 11. Contract Development and Review ..................................................................................................14 12. Construction Work Planning, Scheduling, Execution, Control, and Management .................20 13. Contract Billing and Cost Related Accounts ..................................................................................23 14. Subcontractor Evaluation, Approval, Management and Control...............................................24 15. Supplier Evaluation, Selection and Approval.................................................................................27 16. Employee Performance Evaluation ..................................................................................................28 17. Company and Project-wise Budgets.................................................................................................29 18. Revenue Recording..............................................................................................................................30 19. Project Cost Accumulation ................................................................................................................32 20. Accounts Receivable............................................................................................................................34 21. Accounts Payable.................................................................................................................................35 22. Fixed Assets ..........................................................................................................................................36 23. Inventory...............................................................................................................................................37 24. Cash and Bank.....................................................................................................................................38
- 3. (2/38) 1. General Issues # Description Ref. Y/N N/A A Risk Consciousness 1 Is the management fully considering risk factors in taking the best course of action? 2 Is management communicating these risk factors to employees appropriately? B Board of Directors 3 Is the board exercising management, technical, and other expertise, along with the mindset that is necessary to perform its oversight responsibilities effectively and efficiently? 4 Is the board asking about scrutinizing management's activities, present alternative views, and act in the face of a failure? C Objective Setting 5 Are business objectives appropriately communicated to all levels of the organization? Company level Division level Department level D Adherence to Ethics 6 Does the company’s standards of behavior reflect integrity and ethical values? 7 Are ethical values communicated to everyone through explicit guidance?
- 4. (3/38) 8 Have integrity and ethical values conveyed to everyone through a formal code of conduct? 9 Are communications channels existing where employees feel comfortable by bringing relevant information? 10 Have integrity and ethical values communicated through management actions and the examples set by them? 2. Strategic Business Risks Management # Description Ref. Y/N N/A 1 Are new entrants (companies) increasing risks to the business of the company? 2 Is price competition in the construction industry making the achievement of the revenue targets difficult? 3 Are unexpected actions of the competitors increasing risks for the company's competitive position? 4 Are unexpected changes in the market challenging the competitive position of the company? 5 Are immature risk management processes and lack of accountability impacting the achievement of objectives? 6 Is there a significant exposure of sensitive data entrusted to a company’s management that may publicly disclose security weaknesses or outsider intrusion? 7 Is the employer asked to sign a non-disclosure agreement before all documents are shared with them?
- 5. (4/38) 8 Are the advancements in technology not capitalized upon due to the company's reliance on current paradigms? 9 Is the service failures increasing risks for the company's ability to maintain customer satisfaction and expand its market share? 10 Is there a risk that the company will not optimize business performance by not effectively prioritizing and balancing its business targets? 11 Is there an ineffective strategic planning process that adversely affects the company's capacity to formulate viable business strategies? 12 Is there a risk that the company employees are not being led effectively, resulting in a lack of direction, customer focus, motivation, management credibility, and trust? 13 Is there a risk that the company may lose customers, key employees, or its ability to compete due to perceptions impacting the company’s reputation in the marketplace? 14 Is there any risk for the company of being unable to implement process or service improvements quickly enough to keep pace with changes in the marketplace?
- 6. (5/38) 3. Operating Risks Management # Description Ref. Y/N N/A 1 Are the company's processes consistently meeting customer expectations and increasing earnings potential? 2 Is there a failure to manage outsourced activities that may result in the third parties not acting within the intended limit of authority or not performing in a manner that is consistent with the company's strategies, objectives, or regulatory requirements? 3 Is the company's resource allocation process not sustaining competitive advantage or maximizing returns? 4 Does the company adequately provide for physical security and other aspects of a conducive work environment that is necessary to ensure continued employee safety? 5 Is there a lack of training, knowledge, skills, career opportunities, or experiences of key personnel that may hinder the achievement of the business objectives? 6 Is there any risk of ineffective lines of authority and/or failure to establish clear policies or limits of authority that cause managers or employees to do things they should not do? 7 Are unrealistic, misunderstood, subjective, or non-actionable performance measures causing managers and employees to act in a manner that is inconsistent with the company's objectives, strategies, ethical standards, and prudent business practices? 8 Are the company's physical, financial, or information assets used for unauthorized purposes by employees or others? 9 Is there a lack of relevant and/or reliable information supporting pricing decisions that may result in unprofitable contractual revenues?
- 7. (6/38) 10 Does the company's organizational structure negatively impact its ability to react to change? 11 Does the company's organizational structure negatively impact its ability to optimize its business strategies? 12 Are poorly designed operations and unnecessarily slow processes negatively impacting the company's ability to achieve its business objectives? 13 Are poor communication channels resulting in messages that are inconsistent with the designated responsibilities and are not effectively conveying information as planned? 14 Are the current practices resulting in under-utilized resource capacity, thus, driving higher costs and lower profit margins; or inadequate resource capacity resulting in an inability to satisfy customer demands? 15 Are the problems with the main supplier adversely affecting the company's ability to provide quality service at competitive prices? 16 Are IT controls effective in ensuring that only approved application programs are loaded into the information system? 17 Are the company's access controls effective in preventing inappropriate access to data or systems? 18 Is information distributed in a way that stops its use for an unintended purpose? 19 Is there a risk that the company is exposed to financial loss as a result of cash/funds shortage? 20 Is there a risk that the company may not be able to fulfill its operational or financial obligations on time? 21 Is the company exposed to a loss as a result of the default by an entity with which the company does business? 22 Is there a risk that the company processes are not ensuring that funds will be used for increasing future earnings?
- 8. (7/38) 23 Is there a risk that hardware, networks, software, people, and processes are not effectively and efficiently supporting the current and future processing needs of the company? 4. Quality Management Systems (QMS) # Description Ref. Y/N N/A 1 Have quality objectives been set, documented and communicated to the organization by the management? 2 Is quality always on the agenda at management meetings? 3 Has management set clear, documented strategies for QMS development? 4 Have QMS processes been determined and documented? 5 Has the quality policy been familiarized and displayed and posted in selected places? 6 Is the quality policy subject to regular reviews for the latest developments in the industry? 7 Are QMS processes analyzed for effectiveness? 8 Does the organization include a dedicated specialist quality assurance resource? 9 Does the dedicated quality assurance resource report directly to the senior and/or top management? 10 Is the QMS certified? 11 If certified: Has certification been retained for more than 3 years? 12 Is QMS published/made accessible through efficient electronic systems? 13 Are Quality Control and Testing (QC&T) activities covered by documented plans and procedures?
- 9. (8/38) 14 Does the organization include a separate QC&T department? 15 Are personnel involved in QC&T obtaining specialist training to enhance their skills? 16 Are customers routinely informed of the testing milestones? 5. Document Controlling and Handling # Description Ref. Y/N N/A 1 Is QMS related documentation subject to systematic control? Is there a separate file for each project under construction? Is the contract file containing the following information? Agreement, up-to-date – duly signed by all parties Contact details of the employer Contact details of all subcontractors Contact details of consultants Contact details of all government persons involved in the project as inspectors or otherwise Original estimates of the project Other pertinent data Revenue and cost data for the current period, year-to- date, and project to-date projections Billing and revenue recognition methods 2 Is document control based on a well-functioning and up-to-date electronic systems? 3 Is document control supported and managed by specialist personnel? 4 Does the organization utilize an up-to-date electronic system for document storing and handling? 5 Are QMS documents systematically distributed to the users?
- 10. (9/38) 6 Are records systematically controlled (storing, protection, retrieval, legibility)? 6. Contract Order and Management # Description Ref. Y/N N/A 1 Does the company operate a system for contracts and order registration and management? 2 If yes: Is the system electronically driven (e.g. MRP or ERP system)? 3 Are contracts and orders subject to contract/order review? 4 Is a capability evaluation conducted complementary to the contract/order review? 5 Does contract and order management include the use of a quality plan?
- 11. (10/38) 7. Communication Systems # Description Ref. Y/N N/A 1 Does the company routinely establish structured communication with employees, management, banks, suppliers and customers? 2 Does communication include routine documented progress reporting? 3 Are communication records archived electronically? 4 Has there been a meeting between the project manager, project engineer, IT personnel and management to discuss internal controls, job communication, etc.? 5 Is there adequate check that company communication is not subject to any sabotage or can be accessed by anyone outside the company? 8. Customer Satisfaction # Description Ref. Y/N N/A 1 Does the company handle customer's feedback and complaints? 2 If yes: Is the system electronically driven? 3 Is there a process owner assigned for handling customer complaints? 4 Is there a report available from the system that reflects all customer complaints have been addressed properly? 5 Does the system generates a report on customer feedback?
- 12. (11/38) 6 Does the system provide a report on how effectively and efficiently complaints are addressed by departments or individuals? 9. Project Design and Design Control # Description Ref. Y/N N/A 1 Does the organization include a Design & Engineering (D&E) department? 2 Is D&E based on up-to-date design systems and tools? 3 Have efficient systems for electronic storing of D&E documents been established? 4 Does the company operate a system for efficient design control? 5 If yes: Does the system focus on both design input and output? 6 Are various types of checking (e.g. self-checking, discipline check, etc.) being carried out? 7 Are designs subject to review at one or more defined stages? 8 Are designs subject to validation? 9 Does the system include control of design changes?
- 13. (12/38) 10. Tendering and Accepting a Project # Description Ref. Y/N N/A 1 Is management supervising the progress of the tenders in progress themselves? 2 Due to capacity constraints, is management choosing the projects that would be delivered the best, in terms of both margins and time of completion? 3 Are all risks identified, recorded and translated into their cost impact in the quoted price of a contract? 4 Does a project has a high execution risks due to its specialized nature? 5 Has someone worked out the part of work to be executed by sub-contractors? 6 Has the cost impact of subcontractor work been included accurately in the quote? 7 Has the sustainable margin included in the quote? 8 Has the contractor made his fitness test in terms of all resources required for the execution of a project before going for the tendering process? 9 Has there been a capacity and capability evaluation done for the skills and resources required for the completion of a project before competing for a project? 10 For the riskiest projects, has there been a special study made to ensure timely completion? 11 For the riskiest projects, has there been high return or profit expected? 12 For the riskiest projects, has the track record for such projects been studied? 13 If yes: What has been the success percentage in those projects?
- 14. (13/38) 14 Has there been any resource change since the last project of similar risks was carried out? 15 If yes: Has the fresh evaluation of skills and resources been made? 16 Has the board been informed about the risks associated with a project to ensure the bid is profitable? 17 Has the market changed in terms of cost and other factors related to a project? 18 Have all factors been considered before bidding for such a project? 19 Are all supply chain partners willing to work at the same terms and conditions that the company used to have when a similar project was carried out last time? 20 Has the expert advice been taken in case of a dispute happening with the employer? 21 Are there special provisions given in the contract about the change orders or variations orders in terms of their impact on the cost of a project? 22 Is the proper approval procedure mentioned for change orders or variation orders in the contract? 23 Have the contract value been studied in the light of external factors? 24 Has the sensitivity analysis been carried out to know the profit at different levels of cost achieving before going for bidding? 25 Has it been ensured that under the worst-case scenario company may get a sustainable margin on a given project? 26 Has it been ensured that the employment contract is covering all necessary clauses and leaving no room for confusion between the parties at the execution stages?
- 15. (14/38) 11. Contract Development and Review # Description Ref. Y/N N/A 1 Has a full set of the contract documents been provided for review? 2 Are there inconsistencies or any potential for inconsistencies between the contract documents? 3 Have all areas of the contract that need to be checked by a technical adviser been identified in the review, e.g.: technical aspects; employer obligations; rely on information; performance tests; all limits on liabilities; and levels of liquidated damages? 4 Is there or has there previously been an interim arrangement in place between the employer and the contractor, e.g., work may have commenced under a letter of intent? 5 If so, what are the implications of this ongoing or previous arrangement? 6 What law governs the contract? 7 Is there advice taken on the implications of this choice of law? 8 Does the contract identify "performance criteria" in which the project when completed is required to meet? 9 Is the contractor's obligation to meet these criteria from an overriding obligation or is it subject to a contractor's duty only to use reasonable skill and care if such a duty of care is specified in the contract? 10 What responsibility does the employer assume in respect of any designs, plans or technical information provided by them to the contractor?
- 16. (15/38) 11 As regards any design/information provided by the employer, does the contract require the contractor to check this information and to assume responsibility for errors that could have been discovered by an experienced contractor? 12 Is the contractor entitled to rely on the accuracy of any of this information? 13 If so, does the employer have adequate recourse against the third parties who may have provided this information originally? 14 Is there adequate time provided in the contract for the employer to carry out such a review? 15 If the detailed design is to be reviewed by the employer, by reference to what criteria is such approval to be made? 16 Does the contract provisions in respect of any design review and generally that approval by the employer does not release the contractor from any liability which he might otherwise have in respect of the design? 17 If the review is to be carried out by a third party, such as an independent engineer, on behalf of the employer, is there provision elsewhere for care to be executed by that third party in favor of the contractor? 18 Does the contract provide for performance tests to be performed to check (inter alia) that the project is capable of achieving the performance criteria above)? 19 Is the passing of the performance tests a condition precedent to handover? 20 What does the contract provide for if there is a failure in the performance tests?
- 17. (16/38) 21 Does the contract provide for the employer to choose between the following remedies: unlimited remedying of the defect by the contractor and retesting; termination of the contract and recovery of damages from the contractor; handover of the project nevertheless to take place and for the contractor to pay "buy down" liquidated damages? 22 Does the contract provide for the payment of liquidated damages in the event of delay? If so, at what rate and up to what maximum limits? 23 What is "completion" to establish the payment of liquidated damages? Ideally, the performance tests should have been completed before completion can take place. 24 Are there unusual terms contained in the liquidated damages clause, e.g., liquidated damages calculated as being a percentage of the unfinished part of the work or only payable if the other parts of the project are already in place? 25 Does the contract entitle the contractor to claim for extensions of time for the employer's default? (If not, the liquidated damages provision may not be enforceable). What other matters entitle the contractor to claim an extension of time? 26 Have you considered the impact of the governing law on liquidated damages? 27 Does the contract provide for a clear right of the employer to terminate for prolonged delay (i.e., when the maximum limit of liquidated damages has been reached)?
- 18. (17/38) 28 If the employer is entitled to terminate the contract for prolonged delay, what damages are recoverable from the contractor following such termination? 29 Is any element of consequential loss recoverable? 30 Is there a clause in the contract requiring the contractor to catch-up any delay which arises and providing that failure to do so amounts to a breach of the contract? 31 Is the payment of the contract price front-end loaded? 32 What is the duty of care imposed by the contract in respect of materials and workmanship? 33 Does the contract provide for the employer or engineer to be able to inspect the works as they are performed and to require the contractor to put right any defective work? 34 Is there a defects liability period mentioned in the contract and, if so, for what period? 35 Does the contract draw any distinction between different aspects of the work (e.g., between engineering and civil works)? 36 What is the effect of any final certificate issued at the end of the defects liability period? 37 Does the contractor try to exclude his liability in any way for any defects arising after the end of this period (e.g., is there an exclusive remedies clause)? 38 What does the local law provide as regards a contractor's residual liability for latent defects? 39 If the contractor fails to remedy any work for which he is responsible, does the contract entitle the employer to employ a substitute contractor to do this work and then for the employer to recover his costs from the original contractor? 40 Are there any caps on the liability of the contractor to put right any defective work?
- 19. (18/38) 41 Does this cap apply to any re-performance requirements imposed on the contractor before handover? 42 What does the contract provide for in respect of defects remedied during the defects liability period, i.e., does a new defects period start to run in respect of the replaced part and/or is the overall defects liability period extended by the time during which the works were put out of use due to that particular defect? 43 How does the contract deal with the responsibility for costs in the situation where the employer requires the contractor to uncover work because he has a reasonable suspicion that there may be a defect, having identified a similar defect elsewhere in the works? It is not necessarily logical simply to allocate the costs of uncovering work by reference to whether or not a defect is discovered. 44 Does the contract require the contractor to notify the employer/engineer before any work being covered up? 45 Does the contract exclude liability for consequential and/or economic loss? 46 Is the employer entitled to deduct sums from interim invoices in respect of defective work? 47 If a force majeure event arises, is the contractor entitled to any monetary claim or only to extensions of time? 48 Does the time of prolonged force majeure need to be continuous periods or are cumulative periods occurring within a fixed time also taken into account? 49 Does the contract provide for termination for prolonged force majeure? If so, after how long and at whose option? 50 Is the contract price expressed to include all contingencies and not to be subject to revision to take account of any fluctuations? 51 If payment is by milestones, does the contract deal with what is to happen where progress is delayed due to the employer's default?
- 20. (19/38) 52 Is payment by reference to a pre-agreed payment schedule? If so, in what circumstances is the employer entitled to adjust this schedule? 53 Is the employer entitled to deduct sums for defective work or the cost of repairs carried out by a replacement contractor? 54 Does the contract provide for the contractor to supply sufficient evidence of work done with interim invoices for the employer to be able to check that payments are due under the contract? 55 Does the contract provide for any retentions from payments to be made to the contractor? 56 Is the employer responsible for any taxes otherwise payable by the contractor? 57 If the employer is responsible for payment of such taxes, does the contract expressly exclude penalties payable by the contractor and is there provision for the contractor to reimburse the employer any tax credits subsequently recovered? 58 Does the contract provide for business interruption insurance covering the loss of construction due to delay caused by force majeure or employer's risks, or to top up the liquidated damages payable by the contractor for delay? 59 Is there provision in the contract for the contractor to take out defects liability insurance? 60 Does the contract provide for the contractor to indemnify the employer against any claims brought by third parties for infringement of intellectual property rights? 61 Does the contract provide that subcontracting of the contractor's obligations may only be done with the consent of the employer? 62 Is the identity of all subcontractors subject to the approval of the employer? 63 Does the contract require the contractor to ensure the terms of the subcontracts reflect the terms of the main contract? 64 Is any form of dispute resolution specified? 65 If not, will the courts of UAE have jurisdiction by default?
- 21. (20/38) 66 Is the contractor obliged to comply with all local and international environmental regulations? 67 Does the contract provide for the contractor to supply the employer with weekly, monthly and/or annual reports covering: progress of the works; details of events affecting the progress of the work; accident reports; and security reports? 68 Is the contractor responsible for site security? 69 In respect of variations, is the contractor obliged to maintain detailed records of work done and to allow the employer to inspect these? 70 Does the contract provide that the lenders and representatives of the lenders are to have the same rights of access and the same rights of attendance at all tests and inspections as the employer? 71 Apart from the above, does the contract provide a right of access on the part of the lenders or their advisers to documents and to the site at any time? 12. Construction Work Planning, Scheduling, Execution, Control, and Management # Description Ref. Y/N N/A 1 Does the company operate a structured system for construction planning? 2 Is construction planning conducted through specialized project management soft wares like Primavera 6 or Prince 13.1 or another software?
- 22. (21/38) 3 Does construction planning involve resource planning (equipment, personnel, instructions, etc.)? 4 Does personnel resource planning address the availability of required competence and qualification? 5 Does the company operate a structured system for construction control? 6 Does construction control involve the use of a quality plan? 7 Does construction control include routine segregation of deviating /non-conforming materials and equipment? 8 Is the quality of services ensured through structured and documented control systems? 9 Are relevant construction tools and equipment subject to scheduled calibration? 10 Are construction tools, machinery, and equipment subject to routine preventive maintenance? 11 Are there proper time and cost budgets in place for each construction activity? 12 Are these budgets followed strictly? 13 Are budget deviations reported to the construction manager and finance manager on time? 14 Are all out of budget costs approved before they are incurred? 15 Are budgets prepared on a rolling basis? 16 Is management kept aware of an increase in cost impact due to any factor whatsoever? 17 Are budget deviations reported to management regularly? 18 Have all change or variation orders been approved by the employer at the time of their intimation to the contractor? 19 Has the cost and time impact of each change order been discussed with the employer in detail and agreed upon by them in writing? 20 Has the cost and time impact because of change orders been added to the contract value and delivery time of a project?
- 23. (22/38) 21 Has the employer been informed about the escalation of material prices as per the contract? 22 Has the impact of such escalation included in the project value? 23 Is the financial accounting and reporting system reliable, consistent, accurate and up-to-date? 24 Is the reporting system providing all the required information when needed? 25 Is there any audit of the financial accounting and reporting system done regularly by an external auditor? 26 Are corrections suggested by the auditor incorporated into the system immediately? 27 Are there reasonably accurate estimates available for the cost to completion during the progress of a project? 28 Have the latest cost estimates been included in the cost of completion of a project? 29 Have the cost to completion estimates been compared with the initial budgets? 30 Have the reasons for deviations noted and communicated to the management regularly? 31 Is there a framework for contingencies made that would address relevant delivery risk areas and are these areas being examined regularly? 32 Are there efficient and effective review process of operations in place? 33 Are the liquidated damages and other close-out risks and obligations adequately addressed? 34 Have the list of learning points made from the delivery of the project for future work on a similar project?
- 24. (23/38) 13. Contract Billing and Cost Related Accounts # Description Ref. Y/N N/A 1 Do all contracts, subcontracts and change orders include an adequate description of the work to be completed, timetable, billing arrangements, etc.? 2 Is an over/under billings report generated and reviewed by the project manager or other appropriate person? 3 Are subcontractor billings approved by the project manager and compared to subcontractor terms before they are paid? 4 Do the recorded amounts of subcontractor charges include retainage amounts withheld from payments to subcontractors? 5 Are persons preparing payroll independent of other payroll and personnel duties (e.g., timekeeping, distribution of checks and hiring employees) and restricted from access to other payroll data or cash? 6 Is there a comparison of current payrolls with previous payrolls made? 7 Are variances investigated and documented? 8 Have the types of indirect costs being allocated to contracts been reviewed for compliance company policy and procedures? 9 Is the percentage-of-completion calculation verified by a second person based on costs incurred to date and the estimate to complete?
- 25. (24/38) 14. Subcontractor Evaluation, Approval, Management and Control # Description Ref. Y/N N/A 1 Is a subcontractor financially stable and sound? 2 Are they able to take the financial burden of the job? 3 Has a subcontractor been approved by the employer in case it is provided in the main contractor agreement? 4 Does the legal status (sole trader; limited liability company or partnership; charity; public body etc) of the subcontractor and its governance have implications for the proposed contract and its delivery? 5 Has the subcontractor disclosed all contracts it holds? 6 Has the subcontractor provided the list of terminated agreements/contracts? 7 If yes, have they mentioned the reasons for the termination of those agreements? 8 Has the subcontractor mentioned the range of services offered by them? 9 Has the number of jobs the subcontractor is working on checked to determine if they can handle our job? 10 How long the subcontractor been serving in the given service category? 11 Has the subcontractor worked with our company before this project? 12 How was the experience of working with the subcontractor?
- 26. (25/38) 13 Is the subcontractor a party in any litigation which might affect its ability to deliver the proposed contract? For example, any action in the civil or criminal courts, or an employment tribunal? 14 Has the subcontractor disclosed the names of its directors (or trustees) and senior managers together with details of their previous appointments along with the names of the companies? 15 Has the subcontractor sufficient capacity to deliver its commitments under the proposed contract whilst still meeting its other commitments? 16 To what extent do the main contractor’s business strategies (e.g. for growth, diversification) match to those of the subcontractor? 17 Does the subcontractor comply with health and safety legislation? 18 Has it carried out health and safety risk assessments covering the proposed subcontracted learners? 19 Has the subcontractor declared to the main contractor reportable injuries, diseases and dangerous occurrences covered by the UAE regulations, together with the actions they have implemented to prevent re-occurrences? 20 Does the subcontractor comply with legislation on employment (labor laws in UAE)? 21 Does the subcontractor comply with legislation on immigration? 22 Does the subcontractor adhere to a policy for preventing and dealing effectively with bullying and harassment? 23 Does the subcontractor has appropriate data protection and security systems for the exchange of personal and financial data with the main contractor? 24 Does the subcontractor intend to subcontract any part of the work to another contractor? 25 Does the subcontractor hire appropriately qualified and trained staff to deliver the proposed contract effectively and efficiently?
- 27. (26/38) 26 Does the subcontractor follow a policy of promoting the health, safety, and well-being of workers? 27 Does the subcontractor devise a policy for dealing effectively with complaints? 28 How effective are the subcontractor’s arrangements for communicating with the employer? 29 How effective are the subcontractor’s arrangements for communicating with workers? 30 Does the subcontractor formulate a policy on environmental sustainability? 31 Has the subcontractor a track record of implementing, reviewing and improving policies? 32 Does this review focus on the impact of policies on workers? 33 Does the subcontractor have appropriate quality assurance arrangements: audits, self-assessment reports and improvement plans, internal and external verification of assessment? 34 Can the subcontractor provide evidence and verification (for example, references) to support their assertions? 35 Has the subcontractor taken advice from its legal advisers and accountants about the proposed contract and the implications of subcontracting? 36 Does the subcontractor understand fully all clauses in the proposed contract? 37 Has the subcontractor reviewed all the implications of the contract in its entirety? 38 Have the proof of insurance from the subcontractors taken and checked its expiry date?
- 28. (27/38) 15. Supplier Evaluation, Selection and Approval # Description Ref. Y/N N/A 1 Is a structured system for supplier selection, evaluation, and approval in operation? 2 Does the system also include prospective suppliers? 3 Does the company operate a list of approved suppliers? 4 Does the company actively seek alternative suppliers of Health, Safety, Environment and Quality (HSEQ) critical goods? 5 Are technical requirements and quality requirements accurately specified in the purchase contracts and POs? 6 Is purchasing assisted by an ERP system? 7 Have suppliers and contractors been categorized by criticality? 8 Does the company operate a formal system for scheduled quality assurance auditing of suppliers? 9 If yes: Are such audits carried out by qualified and trained personnel? 10 Are supplier quality assurance audits subject to reporting, efficient follow-up and verification of effects from audit results?
- 29. (28/38) 16. Employee Performance Evaluation # Description Ref. Y/N N/A 1 Is the competence of the employee reflecting the knowledge and skills needed to perform assigned tasks? 2 Is management focusing its attention on acquiring and retaining the skill levels necessary to accomplish the company's goals and objectives? 3 Does the company’s organizational structure define key areas of responsibility and establishes accountability for everyone? 4 Does the company's assignment of authority and responsibility establish the degree to which individuals and teams are authorized and encouraged to act to address issues, solve problems and take advantage of the challenges? 5 Does the company’s assignment of authority and responsibility establish limits of authority? 6 Do individuals know how their actions interrelate and contribute to the achievement of the company’s overall objectives? 7 Does the human resources department appropriately address hiring, orientation, training, evaluating, counseling, promoting, compensation, and remedial actions, driving expected levels of integrity, ethical behavior, and competence? 8 Is the company’s staff subject to an annual appraisal? 9 Does the appraisal system comprise all staff levels and categories? 10 Are appraisals carried out and recorded using a structured and standardized format? 11 Does the appraisal meeting agenda include competence and training needs?
- 30. (29/38) 12 Does management put focus on appraisals follow-up? 13 Are personnel training needs and competence enhancement systematically identified? 14 Are well-functioning tools (e.g. matrix) used for qualification and skills follow-up? 15 Is personnel management based on an up-to-date electronic system? 17. Company and Project-wise Budgets # Description Ref. Y/N N/A 1 Are budgets for both company level and project level prepared? 2 Are these budgets updated according to the changing scenario, the progress of the projects and change in factors of construction? 3 Are the deviations from the budgets calculated regularly and sent to responsible persons for comments and corrective actions in the future? 4 Are change orders accounted for by a separate person? 5 Are budgets revised following the change order impact on them? 6 Is management reviewing and approving bids, estimated job costs and updated estimates as the job progresses? 7 Are gross profits being analyzed on a job-by-job basis for unauthorized costs and to determine if costs are being shifted to other jobs? 8 Has there been a special examination made into the costs that are affecting project profitability?
- 31. (30/38) 9 Is someone from management performing surprise visits to job sites regularly to ensure procedures are being followed in entirety? 10 Are job site equipment and materials secured when there are no employees present to protect these assets from theft? 18. Revenue Recording # Description Ref. Y/N N/A 1 Is the following information available before recording revenues: Method of accounting for the project Type of the contract – fixed-price or cost-plus Recognition of the prospective losses Application of the matching principle Use of appropriate completion levels during interim periods? 2 Are the project profits measured through the percentage of completion method? 3 Has a loss made in a given period been accounted for in the same period? 4 Has the correct cost been booked against the revenue recognized for a given period in compliance with the matching principle? 5 Is there a fresh forecast prepared for the factors to be used in the execution of a project? 6 Is there any change foreseen in the estimates or budgets under the changing scenario, if any?
- 32. (31/38) 7 Has the cost impact of the changing scenario been noted and shared with the finance manager, construction manager, and project manager? 8 Is there a projection of project revenues prepared quarterly after discussion with the project managers and directors? 9 Has a billing test been performed by reviewing the procedure for applying the accurate markups on unbilled costs? 10 Has the time log between the incurrence of the cost and preparation of the bills or invoices been examined? 11 Have all costs been converted into invoices or bills following the agreement signed with the employer? 12 Have the time of incurring cost and its recording in a period and its conversion into invoices been reviewed following the agreement signed with the employer? 13 Is there any unusual delaying happening in the preparation of invoices as there are excessive supporting documents awaited? 14 Is the billing system working efficiently and effectively? 15 Are all bills approved by project management before issuing them to the employers? 16 Is the accounting department maintaining records on the status of unbilled costs?
- 33. (32/38) 19. Project Cost Accumulation # Description Ref. Y/N N/A 1 Have all POs been prepared after taking necessary approvals? 2 Have prices been compared that are taken from all the allowed suppliers? 3 Has the lowest price supplier chosen from the list of approved suppliers? 4 Is price comparison statement available for later examinations, audit and reviews? 5 Have all materials or goods purchased recorded in a proper receiving report? 6 Has the accounting department compared prices paid to suppliers to the ones given in the estimates or budgets? 7 Are there deviations happening from these estimates or budgets? 8 Are these deviations noted and communicated to project managers or project directors? 9 Is appropriate action taken on the deviations reported to the project management? 10 Have the vendor invoices been matched with the underlying documents like POs, receiving reports and other documents with the amount paid to suppliers or vendors? 11 Are all supporting documents available in the original form and not in their photocopies? 12 If there are deviations found in invoices and documents from payments made to the supplier, have appropriate corrective action taken? 13 Is there someone checking project costs with the original estimates?
- 34. (33/38) 14 Are all purchase transactions recorded on time? 15 Is it seen as if one-month purchase transactions are recorded in the next month? 16 Are all overheads correctly appropriated to projects? 17 Is there a calculation mechanism in place for the appropriation of overheads to all projects? 18 Is the correct method for overhead recovery applied for each element of the overheads? 19 Is there a time card given to each employee? 20 Is this time card punched by every employee in the morning? 21 Is payroll prepared from the time card records? 22 Is someone verifying the employees physically to the one given in the payroll regularly to ensure no ghost employees found in the payroll? 23 Is there a monitoring on each time card punching place to make sure that a genuine person is punching the card and no proxy punching is happening? 24 Is there a CCTV near the time card machine to ensure fool- proof punching of time for each employee? 25 Is the time card approved by the employee’s immediate supervisor? 26 Is the flow of information from time card to time records through time accumulation and eventually to job cost summary verifiable? 27 Is someone testing regularly that time punching machine reflects accurate time for the staff and labor in the cost summary? 28 In the case of senior staff, time may be allocated to different departments, has there been an accurate system in place to record the time of each senior staff to different departments? 29 Is department head verifying monthly overtime for the employees reporting to them by signing monthly overhead reports?
- 35. (34/38) 30 Is the payroll preparation segregated from the payroll disbursement? 31 Is the payroll disbursement segregated from payroll recording? 32 Is the payroll summary checked and approved by someone who is not preparing it? 33 Are general expenses been recorded in the same project for which they are incurred? 34 Are all expenses approved separately from the one who disbursed? 35 All documentation of expenses incurred maintained on-time and not kept pending for any reason whatsoever? 36 Is cash handling staff rotated on quarterly or semiannually? 20. Accounts Receivable # Description Ref. Y/N N/A 1 Are all receivable balances up-to-date at each month's end? 2 Is someone reviewing the ageing analysis of all receivables monthly? 3 Any amount exceeding 90 days period should be asked for explanation? 4 Are receivable write-offs authorized and approved by the board in writing? 5 Are there investigations triggered before writing offs of such receivable balances? 6 Are project managers making any help in the collection process through regular follow-ups with the clients? 7 Is the collection staff efficient in the recovery of receivable balances? 8 Is there a need for a formal collection agent in the case of inordinate delay happening in the collection of the receivable balances?
- 36. (35/38) 21. Accounts Payable # Description Ref. Y/N N/A 1 Are all POs pre-numbered like sales invoices? 2 Are POs reflected in the system including used, voided and available to ensure proper sequence? 3 Is there any gap in the numerical sequence of the POs? 4 If yes, have you find out and documented the reasons for such a gap? 5 Are all POs supported by underlying documents like receiving reports, shipping documents (original documents and not photocopies)? 6 Are POs approved by someone other than who prepared them? 7 Are the payments system separated from the POs preparing staff? 8 Is anybody reviewing the system to identify when materials are delivered to a location other than the job site? 9 Is the company issuing a cheque that is modified? (Company should not issue any modified cheque to anyone to have a common control on modified cheques) 10 If employees are given company credit cards for making small payments to vendors, see if the receipts of payments and invoices are provided to the accounts department the same day?
- 37. (36/38) 22. Fixed Assets # Description Ref. Y/N N/A 1 Are reconciliations between physical assets and detail fixed asset records (fixed asset register) reviewed by the manager or other responsible person? 2 Are logs maintained of equipment used on contracts so that depreciation can be charged to the appropriate contracts? 3 Are the estimated useful lives and deprecation methods initially approved and periodically reviewed by the manager? 4 Is there a fixed asset register prepared by the company? 5 Is the fixed asset register linked with the fixed asset module of the accounting information system? 6 If not, anybody preparing reconciliation of fixed asset register and the main ledger for all asset types? 7 Is there someone keeping complete track of assets transferred between job sites and head office? 8 Are there verifiable records available for accurate transfer of assets from one job site to another? 9 Is someone performing a calculation of asset use on different job sites and allocating costs accurately to the projects? 10 Is someone taking physical verification of assets regularly?
- 38. (37/38) 23. Inventory # Description Ref. Y/N N/A 1 Does an appropriate person periodically assess whether excess, slow-moving, obsolete and defective inventory items are identified and accounted for appropriately? 2 Is unused inventory returned from a project priced at the lower of cost or net realizable value? 3 Is someone carrying out monthly physical verification of inventory on selection at random basis? 4 Is the verifier of inventory independent of the staff that is recording all inventory related transactions? 5 Are all receipts and issuances of materials recorded at the same time when they are received or issued? 6 Is someone checking who is independent of inventory recording staff that there are no unrecorded transactions at each day end? 7 Is someone checking that are materials in job sites are properly stacked?
- 39. (38/38) 24. Cash and Bank # Description Ref. Y/N N/A 1 Are cheques signing independent of the initiator of purchases, approver of purchases, receiving, shipping, preparer of cheques, cash receipts, accounts payable and cash book-keeping? 2 Are canceled cheques reviewed for unfamiliar or unauthorized payees, forged signatures and unusually large amounts? 3 If canceled cheques are returned with the bank statement, check for evidence of alterations to the cheques? 4 Are bank accounts reconciled monthly by a person who is independent of the cash receipts and disbursements functions? 5 Is cash on hand reconciled with the books of entry before closing of the day every day? 6 Is someone reviewing the purpose, authorization, and implementation of an imprest fund regularly? 7 Is someone verifying deposits to the fund by an analysis of disbursements from the general operating account? 8 Are all disbursements recorded on the same day? 9 Is someone scrutinizing all disbursements from funds through authorization and back up documentation?