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Master the fundamentals of the construction industry with this highly effective course. An outstanding value, it provides a thorough industry overview and includes AICPA authoritative publications. Content is tailored to the needs of both practitioners and industry financial professionals.
Objectives:
Prerequisite:Basic understanding of accounting and auditing principles
VALUE AID! Construction Contractors AICPA Audit and Accounting Guide and Construction Contractors Industry Developments — Audit Risk Alert736432
Chapter 0
Overview
Course Goals
Introduction
Construction contracting is a unique and complex industry, and the work of CPAs in providing accounting, auditing, and tax services to construction contractors is a unique and complex niche in the accounting profession. The purpose of this course is to give you the specialized and detailed information you need, whether you are a practicing CPA with construction contractors as clients or on the staff of a construction contractor.
Organization
The materials for this course consist of this manual, the AICPA's Audit and Accounting Guide, Construction Contractors, and the Audit Risk Alert, Construction Contractors Industry Developments. SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts, is reproduced in Appendix A of the Audit Guide. SOP 81-1 is often referred to in this manual.
The manual is divided into three main sections. The first section explains how construction contracting is different from other industries. It introduces you to the particular characteristics of the industry with an emphasis on those that have accounting, audit, or tax consequences. Accounting for long-term construction contracts is covered in this section. The section closes with a chapter on the contractor-surety relationship and how sureties use a contractor's financial statements.
The second section of the course focuses on audit issues and approaches that are unique to construction contractors. Included here are detailed analytical review procedures for contractors, coverage of internal controls, and the typical substantive procedures performed in an audit. In this section you will also find a description of how the guidance in the auditing chapters can be
adapted to perform a review in accordance with Statements on Standards for Accounting and Review Services (SSARS).
The third section walks you through the tax rules for construction contractors. It begins with a survey of the tax rules and how they differ from GAAP. The final two chapters of the course deal with the taxation of"small" contractors and "large" contractors.
Surveys show that more than 90% of all construction bonds are in amounts of $1 million or less. In other words, most jobs are for less than $1 million, and most contractors are not very large. So this course emphasizes issues that affect the small- to medium-size contractor. Wherever possible, it offers practical guidance and tips based on the experience of the author and those who helped with the preparation of the course.
Conclusion
The manual is designed to be a permanent reference tool. We hope your reading of it enriches your professional learning experience.
Note. We use the terms he and she alternately throughout the course (except when a particular person is mentioned) since both men and women are well represented throughout the profession.
Chapter 1
Nature of the Construction Industry
Learning Objectives
Introduction
The construction industry offers many opportunities for the small practitioner. There are several reasons for this:
If you have ever been involved with a home renovation project, or followed the progress of a public construction project in the newspaper (for example, a highway or an airport), then you know something about the construction business.
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