Construction Financial Audit
Transparency and traceability over the funds allocated to your project. An independent analysis of the financial, accounting, documentary and contractual aspects of construction works and developments, with visibility over costs, payments, contracts and the application of funds.
What a Construction Financial Audit is
It is an independent analysis of the financial activity of a project or development: where the funds came from, how they were used, which obligations were assumed, and whether disbursements are supported by the available documentation.
The work is financial, accounting, economic, documentary and contractual in nature, and includes an examination of the internal controls over the project's financial management.
Items that may form part of the scope
- Budget vs. actual, budget variances and significant cost changes.
- Project cash flow: funds received, payments, accounts payable, obligations assumed and receivables.
- Contracts, amendments, suppliers and service providers.
- Invoices, supporting documents and reconciliations.
- Progress measurements and their financial effects, advances, reimbursements and retentions.
- Cost centers and allocation criteria.
- Traceability of the application of funds and internal controls over financial management.
Procedures are not applied in a standardized way. The scope is defined according to the purpose of the engagement and the characteristics of each project.
Financial Audit vs. Engineering Oversight
Distinct activities that can work together in the governance of a construction project.
Physical execution and technical aspects of the works
- Physical monitoring of the works
- Compliance with designs and technical specifications
- Quality of execution
- Materials and construction methods
- Technical review of completed work and inspections
- Physical schedule
Technical responsibility: legally licensed engineering or architecture professionals, according to the nature of the work.
Funds, costs, contracts, documents and financial activity
- Budget vs. actual and cash flow
- Payments, suppliers and invoices
- Contracts and amendments
- Reconciliations and traceability of funds
- Documentary review of measurements and payments
- Financial and budget deviations
- Internal controls and accountability reporting
- Economic and financial analysis
Professional focus: accounting, financial, economic, documentary and contractual.
The two engagements are distinct and can be complementary. A Construction Financial Audit does not replace technical engineering oversight, just as technical oversight does not replace an independent accounting and financial analysis of the project's funds. Where needed, reports, measurements and assessments prepared by engineering professionals are used as technical inputs to the economic and financial analysis.
What we can analyze
- Budget and costs. Approved budget, actual costs, significant variances and the project's financial progress.
- Cash flow. Reconstruction and analysis of the inflows and outflows related to the works.
- Contracts and amendments. Financial and documentary analysis of contracts, changes and obligations assumed.
- Payments and suppliers. Matching of payments, suppliers, tax documents and supporting documentation.
- Measurements and disbursements. Documentary and financial correspondence between the measurements provided, billings and payments, without replacing technical engineering validation.
- Traceability of funds. Identification of the path the funds followed and how they were applied to the development.
- Internal controls. Processes for authorizing, contracting, paying and recording expenses.
- Accountability reporting. Organization and analysis of the financial information owed to investors, developers, managers, owners and other stakeholders.
When a Construction Financial Audit may be needed
- A significant increase in project cost or a budget overrun.
- A need to understand where the funds went or to reconstruct the cash flow.
- Discrepancies between measurements, billings and payments.
- Suspected improper payments.
- A stalled project, or a change in administration or management.
- Disagreements among investors, developers or managers, and shareholder conflicts tied to the development.
- Accountability reporting, including under a segregated-asset (patrimônio de afetação) structure.
- Judicial reorganization or insolvency.
- A need for transparency toward investors and lenders, or for independent technical information for lawyers, creditors and administrators.
Who the service is for
- Real estate developers
- Construction companies
- Investors
- Funds
- Financial institutions
- Condominiums
- Buyer groups
- Judicial administrators
- Creditors
- Partners and shareholders
- Boards of directors
- Legal departments
- Law firms
- Project owners and managers
Our approach
Understanding the project
Understanding the development, its financial structure, the parties involved and the purpose of the audit.
Collection and organization
Receiving, classifying and structuring the financial, accounting and contractual documents.
Financial reconstruction
Organizing the flows of funds, payments, suppliers, contracts and other relevant transactions.
Analysis and testing
Applying the procedures defined in the scope, cross-checking information and identifying discrepancies or points that require further work.
Conclusions and report
Consolidating the analyses and presenting the relevant findings in a technical report.
Where appropriate, the analysis uses forensic accounting and data analytics techniques to identify patterns, exceptions and transactions that require further verification. Inconsistencies are reported as technical findings, with reference to the evidence — without characterizations that depend on a separate inquiry.
Possible Deliverables
The format is defined according to the agreed scope and the purpose of the work.
- Technical report
- Executive report
- Financial analyses
- Reconciled data sets
- Financial statements and schedules
- Dashboards
- Findings matrix
- Technical appendices
- Technical opinion, where applicable
Other SGEx Solutions
Services, specialties, contexts and industries connected to this topic under SGEx's relationship matrix.
Related Services
- Financial and Operational AuditExamination of financial statements, processes and controls, focused on the reliability of information and adherence to defined criteria.
- Forensic AccountingReconstruction and examination of accounting records and financial flows for evidentiary purposes, in contexts of suspected wrongdoing, conflict or inquiry.
- Fraud InvestigationTechnical investigation of financial and accounting irregularities, including fund tracing and the documentation of findings.
Related Specialties
- Construction, Infrastructure and Public ContractsConstruction claims, project costs, cost overruns, delays, rebalancing and concession agreements.
- Rendering of Accounts and Financial ReconciliationExamination and reconstruction of accounts, reconciliations, and receivables, payables and balances among partners, officers and other parties.
Related Practice Areas
- Judicial Reorganization, Bankruptcy and InsolvencyJudicial reorganization, out-of-court reorganization and bankruptcy proceedings in which creditors, the debtor and the court all depend on reliable technical information.
- Corporate and Shareholder DisputesDisputes among shareholders, partners and officers, corporate dissolutions, buyout claims and disagreements over financial results.
Related Industries
Need to understand how your project's funds are being used?
SGEx supports companies, investors, administrators, creditors and legal advisors with independent analysis of the financial and accounting aspects of construction works and developments.