Auditing of construction companies and applicable auditing techniques

Construction sector, along with sectors which provide inputs for it, accounts for 33% of Gross National Product (G.N. P.) and 6% of the employed labor. Thus it is one of the main forces driving the economy, The awareness of the need for company extern auditing of Construction companies is quite new. Until recently construction companies were not in need of having their financial tables audited. However this need was felt as their business volume was enough for international tenders. Company extern auditing of the financial statements of construction companies have difficulties stemming from the pecularities of this sector. This, the company risk and the risk inherent in auditing have unnegligible effects on the reliability of the results of auditing. The minimization of this inherent risk depends on the existence of an internal control system of the company. However the existence of such a system will have a very negligible effect on reducemeht of the company risk stemming from the pecularities of the sector. Even if these risk can not be eradicated completely, they must be reduced to on acceptable level. Therefore the primary action to be taken is the determination of auditing areas peculiar to this sector and the establishment of suitable and applicable auditing methods. By this way auditing areas containing high risk can be audited more reliably. This thesis aims both to determine the areas which contain high auditing risks in the construction sector and to establish suitable auditing methods. This thesis consists of 3 sections. In the first section the definition of basic concepts and national and international approaches toward the description of income and related regulations are explained. In the second part the concept of auditing and internal control system are defined and factors of the internal control system peculiar to construction contracts are explained. The main subject of this thesis is in the third part. In this part auditing (risk) areas are generally explained and spesific areas of construction contracts are detailed. In this part also a case company is studied and analysed as an example to enhance the understanding of the subject matter.