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Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350619 716
Construction Professionals Perceptions’ on
Contract Auditing System in Building Projects
Nuruddeen Usman
Department of Building, Faculty of Environmental
Technology,
Abubakar Tafawa Balewa University,
Bauchi, Nigeria
Ibnothman13@gmail.com
Abdulkadir Sani
Department of Building, Faculty of Environmental
Technology,
Abubakar Tafawa Balewa University,
Bauchi, Nigeria
arabs4u@gmail.com
Abstract—Construction managers’
performances indicate operating below
satisfactory in carrying out effective contract
auditing in Nigeria. The study sought the
perceptions of respondents in the field of contract
auditing system in Nigerian construction practice.
The populations are practicing construction
professionals within the study area, and the
respondent selected at random. The study
adopted a well-structured questionnaire and
distributed to the targeted respondents in which
eighty percent retrieved and simple descriptive
analysis used in analyzing the data. The study
revealed that, the respondent are aware of the
contract auditing services in construction sector
and viewed it as effort to mitigate financial fraud,
and the services should perform by professional
construction managers with the need to introduce
special training scheme for contract auditing role
in the field of construction management. study
recommend the present appraisal system which
encourages the competent service of construction
managers in contract auditing should be
maintained, improved and protected by including
comprehensive training course in order to have a
more efficient contract auditing system in the
Nigeria’s construction industry.
Keyword—Perceptions, Contracts,
Constructions, Auditing System and Managers
INTRODUCTION
Perception, as defined in Merriam- Webster
dictionary, is the way of noticing or understanding
something using one of the senses or the way of
thinking about or reading something. In addition,
perception has been defined as a process by which
individuals organize and interpret their sensory
impressions in order to give meaning to their
environment (quizlet.com). According to Weaver
1981, as cited by Dada, 2007 defines perception as
the way human beings gives meaning to things base
on the information gathered.
A building contract generally is an agreement
under which a person called the builder or the
contractor, undertakes for a reward of considerations
to carry out work for another individual refers to as the
building owner or the employer. According to Adebola
(2000), construction contract administration usually
terminates at the final account. More often than not,
the documents connected with the contract are
dumped ones the final measurement and final
payments are made. Ordinarily this should not be so;
there should be post-construction cost control that will
be a means of cross – checking the details of the work
executed. Regrettably this has been neglected.
Furthermore, value for money audit or project audit
should be carried out to ensure that the value
received on the execution of the project is
commensurate with the amount being spent. Such an
audit appraisal should also aim at ensuring that the
principles of economy, efficiency, and effectiveness
achieved in the execution of the projects. Therefore,
the primary issues in accounting for construction
contracts is the allocation of contract revenue and
contract cost to the accounting periods in which
construction work performed. Contract documents
appropriately reflect the works of comprised of the
projects and that the works contract is not an inflated
contract (Anyadike, 2000).
Despite the facts that, the contract auditing system
is paramount in assessing the accountability of any
projects, construction managers performances
indicates operating below satisfactory in carrying out
effective contract auditing in Nigeria either because
they see the role as cumbersome and confusing by
indicating not getting adequate training in it or the
operating environment does not facilitate conveniently
the opportunity to do so. Therefore, the study sought
the perceptions of the respondents about the
construction contract auditing system in Nigeria with a
view to coming up with attractive ideas and trends to
improve performance and to make the system more
efficient.
LITERATURE REVIEW
According to Arah (2000) an auditing – is a
systematic and official examination and check of
business accounts (in this case project accounts), or
as seen by (CRC-2012) as a systematic and
independent examination of data, statement, record,
operations performance (financial or otherwise) of an
enterprises for a stated purpose. Construction
contract audit, therefore, is an essential internal
control process to maximize capital program
effectiveness. The first objective of the audit is to
obtain a documentation of cost incurred and paid for
by the owner in completion of the project to justify if
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350619 717
the request for reimbursement were in alignment with
the applicable contracts. The scope of the financial
audit here includes all cost involved by contractor
including a sub-contractor cost, in addition to direct
cost paid for by the owner. The second objective of
the audit is to obtain an understanding of the control
environment surrounding a particular project to
determine if any control deficiencies noted.
Meanwhile, a project audit provides an opportunity
to uncover issues, concerns and challenges
encountered during the project lifecycle. Conducted
midway through the project, it gives an interim view of
what has gone well, as well as what need to be
improved to complete the project successfully. If done
at the close of a project the audit can be used to
develop success criteria for future project by providing
a forensic review. Generally the purpose of project
audit is to ascertained fair administration of project
cost and to identify lessons learned that can help
improve the performance of a project or improve the
performance of future projects by undertaken a
forensic review to uncover problems to be avoided. In
this way, project audit is highly beneficial to project
round table and provide an outcome that will increase
the likelihood of future projects being managed
successfully, Michael, (2014). Furthermore, in carrying
out the project auditing, the auditor should obtain an
understanding of how management determines the
stages of completion of each contract and perform an
analysis on a contract by contract basis to review the
correlation of the stage of completion, contract
revenue, contract cost, and attributed profit
recognized.
METHODOLOGY
The populations for the study are mainly practicing
construction professionals working in public
sectors/institutions, consulting and contracting firms in
Gombe State, Nigeria and the respondent selected at
random. The study adopted a well-structured
questionnaire and distributed to the targeted
respondents in order to collect relevant data. Analysis
of the collected data carried out using simple
descriptive analysis such as percentage, charts, etc. A
total of eighty (80) questionnaires distributed to
various construction managers across a number of
organizations and a total number of thirty-two (64)
indicating 80% retrieved, sixteen numbers (20%) not
returned. Out of the “64” questionnaires received,
twelve (12) disqualified for not attaining proper assent,
fifty-two (52) sorted out as appropriate respond which
is seen quite adequate enough for the for the analysis.
ANALYSIS AND DISCUSSION OF RESULTS
In order to achieve the stated objectives of the
study, the following analysis were carried out based
on the retrieved questionnaire from the respondents
as follows;
Table 1. The Respondents asked To Indicate the
Level of Awareness of The Termed “Contract Auditing
Services” As Shown Below;
Frequency of the
respondent
Percentage of
respondent (%)
Very aware
12
23
Aware
34
65
Not common to
construction
contract
06
12
Not aware
-
-
Total
52
100
Source: field study, 2015
Base on the analysis, it suggest that 23% of the
responses identified to be very aware, over 65%
aware and nearly 12% shows that, it is not a standard
operation in construction contract as shown in the
chart 1 below. These clearly show that, the practice of
contract auditing system is well known to the
professionals within the study area.
Chart 1. Level of awareness of the respondents on
contract auditing system
Table 2. Respondents Perceptions When Contract
Auditing System Mention In Construction
Frequency of the
respondent
Percentage of
respondent (%)
Effort to mitigate
financial fraud
30
58
Measures to
checkmate
shoddy works
12
23
Determined
compliance with
contractual term
-
-
Evaluating
adequacy of
company internal
control system
10
19
Total
52
100
Source: field study, 2015
23.06%
65.39%
11.54% 0%
Percentage of the respondents
Very aware
Aware
Not common
to
construction
Not aware
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350619 718
From table two above, the construction managers
views on the general perception of the respondents on
construction contract auditing revealed that 58%
viewed it as effort to mitigate financial fraud, 23%
sees contract auditing as an assessment of the level
of works completed and 19% believes it as evaluating
the adequacy of company’s internal control system.
Table 3. respondents view on the aspects of
discpline to carry out contract auditing system in
construction projects.
Frequency of the
respondents
Percentage of
respondent (%)
Projects
owner/client
08
15
Construction
managers
26
50
Accounting
auditors
06
12
Recommend for
more specialized
professional tasks
12
23
Total
100
100
Source: field study, 2015
Table three concerned with the aspect of discipline
or category of personnel to carry out contract auditing
service base on the perception of the respondents,
majority of the respondents 50% suggested should be
performed by professional construction managers
then followed by 23% Recommended for a more
specialized professional task, 15% Wants the project
owner/client to perform the audit work and finally 12%
leave the job to accounting auditors.
Furthermore, the respondents asked to state if
there is any incidents participated or witnessed an
aspect of service identified as
contract auditing and the analysis was shown in
the chart two below;
Chart 2. Levels of witness of contract auditing
systems of the respondents
Base on chart two above, the level of participation
of the respondent on contract auditing services is
often with 50% then follow by 19% of the respondent
as very often, 15% rarely participate and while 8% are
either very rare or not participated at all.
Chart 3: Is there a system of project appraisal
extent apply to the construction contract constituted
by your organization/institution or agency?
From the above chart three, the 88% of the
respondent agreed that there are the systems of
projects appraisal extent apply to construction
contract constituted in their organization/institution
while the 12% indicated no as used to their place of
work. In order to justify that, The analysis reveals that,
about 62% of operating construction managers runs
the services of contract auditing to be the top
management role in their organizations with only 23%
constituting a dedicated section as appraisal unit, this
falls below positive as more is required for efficient
and quality auditing as shown in the chart four below;
Chart 4. Contract auditing in organizations of the
respondent.
19%
50%
15%
8%
8%
Percentage of the respondents
Very often
Often
Rarely
Very rare
not at all
88%
12%
Percentage of respondents
YES
NO
62%
23%
12%
4%
Percentage of the respondent
At top
management
role
Formed a unit
or department
for the specific
role
Contracted
Adhoc
enagagement
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350619 719
Table 5: Will You Support Engaging Contract
Auditor On A Personally Owned And Public Project?
Frequency of the
respondents
Percentage of
respondent (%)
Strongly
supported
10
19
support
32
62
undecided
08
15
Not support
02
04
Total
52
100
Source: field study, 2015
From table five it’s clearly shown that, majority of
the respondent 62% are of the view of supporting the
engagement of contract auditor on personal projects
and public projects but only 04% are not in support of
the system.
Table 6 Do You Support An Enforceable Statutory
Policy And Directives For Compliance Making It
Compulsory For All Construction Projects To
Professionally Audited Before Endorsement?
Frequency of the
respondent
Percentage of the
respondent
Strongly support
16
31
Supported
34
65
Undecided
-
-
Don’t see the
need
02
04
Not support
-
-
Total
52
100
Source: field study, 2015
From the above analysis show that, 65%
supported then followed by 31% that strongly
supported, and a proportion of 4% do not see the
need for the enforceable statutory policy for
compliances.
Table 7 Is There Any Need To Introduce Special
Training Scheme For Contract Auditing Role In The
Field Of Construction Management?
Frequency of the
respondent
Percentage of
respondent (%)
Needful
38
73
The existing
training adequate
14
27
Consider as self
dedicated
disciplines
-
-
No need
-
-
Source : field study, 2015
From Table 7 above 73% sees the needful
introduce special training scheme for contract auditing
role in the field of construction management while
27% agreed that the existing training is adequate.
CONCLUSION AND RECOMMENDATION
Construction contract auditing service is an
attractive aspect of service in the construction
management and the engineering industry as a
service supports as well as purpose operation,
therefore, the outcome of the findings provide room
for the professional to adequately adopt the system of
construction contract auditing system not only within
the study area but Nigeria at large. The following are
the summary of the findings of the study;
Construction contract auditing service is well
aware but many view and limit it to financial related
appraisals rated among another primary aspect.
It considered that construction managers are
more suitable to carry out contract auditing service as
are widely also involved believed that construction
management operations cover adequate the aspect of
contract auditing.
Various establishments have constituted a
system of project appraisals construction contracts
and also most organization runs contract auditing in
their top management offices rather than instituting a
unit for the role, this will undermine the independence
of the report as their will greater tendency of
manipulations and compromise in the processes.
There is need to have established law to
enforce contract auditing to all construction projects
and construction managers are seen as the potential
supporters as well as law enforcers to this effects.
The existing construction management
training is again required to be reviewed to offer more
insight covering adequate the aspect of contract
auditing to have efficient delivery.
RECOMMENDATION
After carrying out the study, within the study area
the following recommendation therefore made to
conclude the work:
The current construction management
practice scheme should be reviewed to include
comprehensive training course specifically for contract
auditing processes by incorporating other aspects of
training/capacity building in the form of workshops,
seminars, etc. equally needed to develop on the
technical knowledge of the construction managers
and other stakeholders in the construction business.
Auditors should be involved right at the
beginning of the project in order to provide a ton of
oversight and often results in limiting cost overruns or
overcharges billing errors.
General awareness procedures should
adopted in promoting a good understanding with the
construction business operators on all the aspects
covers by contract auditing.
Operating institutions in both the private and
public sector should be encouraged to establish a
good appraisal system supported by instituted
auditing unit in their organizations and authorities
should come off with a statutory enforcement that will
Journal of Multidisciplinary Engineering Science and Technology (JMEST)
ISSN: 3159-0040
Vol. 2 Issue 4, April - 2015
www.jmest.org
JMESTN42350619 720
make compulsory all projects audited before
commissioning.
REFERENCE
1. O. Adebola, “Contract Auditor in Construction
Project. Budgetary Planning for Capital Projects
and Construction Contract Auditing”, published
by Nigerian Institute of Quantity Surveyors,
Lagos, 2000.
2. G.O. Arah, “Construction Cost Auditing- A
Panacea for Construction in capital project
procurement, Budgetary Planning for Capital
Projects and Construction Contract Auditing”,
published by Nigerian Institute of Quantity
Surveyors, Lagos, 2000,
3. E. I. Anyadike, “checklist for contract review
and cost auditing, an Agenda for Construction
Contract Auditing, Budgetary Planning for
Capital Projects and Construction Contract
Auditing”, published by Nigerian Institute of
Quantity Surveyors, Lagos, 2000.
4. E. I. Anyadike, “Career Imperatives For
Quantity Surveying, the Academic Professional
and Business Environment”, A Journal of the
Nigerian Institute of Quantity SurveyingLagos
Vol. 33, 2000.
5. S. Michael, “Undertaken a Successful Project
Audit, by Business Improvement Architects”,
mstanleigh@bia.ca, 2014.
6. Quizlet.com. Retrieved from
http://quizlet.com/19582392/chapter-6-
perception-terms-flash-cards/
