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A Guide to Forensic Accounting Investigation, 2nd Edition by Jessica S. Pill, Mona M. Clayton, Thomas W. Golden, Steven L. Skalak

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Chapter 27

Construction Projects

Daryl Walcroft and Anthony Morgan

Disputes involving construction contracts figure strongly among the assignments offered to the forensic accountant, partly because of the complexity and size of such contracts, in which the amounts disputed often run into millions of dollars. An accountant with knowledge of the construction industry can clarify the issues at the heart of the claim, and his work can sometimes add transparency to the nature and root cause of any cost overruns and assist in bringing the parties together.

What was contractually agreed to will play an important role in determining how a construction claim is formulated or evaluated. While the subject-matter expert should guard against making judgments on legal matters, whether a contract has been complied with or administered correctly or not often depends on the facts of the case, and a forensic accountant may well be able to assist in establishing the facts, particularly when an analysis of electronic and financial data is required.

THE NATURE OF THE CONSTRUCTION INDUSTRY

The construction industry covers a wide spectrum of entities, from the small specialty construction firms to sophisticated multinational engineering, procurement, and construction (EPC) contracting corporations. It is a very competitive industry, where bidding and competing for contracts is routine. It is also an industry where there are relatively low costs of entry for new businesses, so supply often outstrips ...

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