Auditing in the real estate and construction sector plays a crucial role as a "filter," helping businesses and regulatory agencies determine the accuracy and reasonableness of investment capital settlement reports. In the context of a volatile market, compliance with regulations is essential. Circular 96/2021/TT-BTC regarding information disclosure and Decree 10/2021/ND-CP Managing construction investment costs is a prerequisite for a business's survival and sustainable development.
Data from the Ministry of Construction shows that errors in the final settlement of investment capital for projects often account for 5-10% of the total project value if not strictly controlled. Conducting audits of the real estate and construction sector not only helps prevent asset losses but also provides a solid legal basis for explaining matters to state inspection and auditing agencies. Let's explore the details of this process and benefits in the content below.
The Importance of Real Estate and Construction Industry Auditing in the New Era
Auditing in the real estate and construction sector is no longer a voluntary activity but is gradually becoming a mandatory requirement for projects using state budget funds or listed companies. The complexity of the material supply chain and fluctuations in labor costs demand an independent auditing firm with in-depth expertise to assess the data.
According to the Construction Law and guiding circulars of the Ministry of Finance, the final investment settlement report for completed projects must be audited before approval. This is to ensure that all incurred costs are within the economic and technical norms and are supported by valid invoices and documents as prescribed by the Accounting Law 2015.
The legal system directly regulates
To fully understand real estate and construction auditing, accountants and investors need to be familiar with the following legal regulations:
- Construction Law 2014 and its amendments 2020: The highest legal framework for investment and construction activities.
- Decree 10/2021/ND-CP: Detailed regulations on the management of construction investment costs.
- Circular 10/2020/TT-BTC: Guidelines on final settlement of completed projects using state funds.
- Vietnamese Auditing Standards (VSA): In particular, standards regarding the reporting of investment capital settlements.
Detailed content of the Real Estate and Construction Industry Auditing Process
Implementing a real estate and construction audit requires seamless coordination between the audit team, valuation engineers, and the company's accounting department. Below are the key steps in the process.
Auditing the project's legal documents.
Auditors will review the entire system of documents from the investment preparation phase to the project completion. This includes checking the validity of the Investment Certificate, the 1/500 scale planning approval decision, and land allocation and lease documents from competent authorities.
The lack of legal documentation can lead to the risk of project suspension or failure to receive project funding. Therefore, Real Estate and Construction Sector Audits focus on comparing actual records with the regulations in Decree 15/2021/ND-CP on the management of construction investment projects.
Audit of construction and equipment costs
This represents the largest proportion of the total investment. Auditors conduct on-site inspections in conjunction with a review of the completion documents to verify the actual construction volume against the design drawings.
| Content of the test | Method of implementation | Control objectives |
| Unit price of materials | Compare the contract and market quotations. | Combating price gouging and fraudulent declarations. |
| Construction volume | Conduct on-site measurements and review of completion documents. | Determine the actual weight accurately. |
| Labor standards | Comparison with the standards of the Ministry of Construction | Comply with cost management regulations. |
| Installation equipment | Check the inspection certificate, CO/CQ. | Ensure origin and source |
Auditing project management costs and other expenses.
In real estate and construction audits, fees such as supervision consulting, design, and contingency fees are often overlooked. However, if left unchecked, these costs can easily exceed the limits stipulated in Circular 12/2021/TT-BXD.
Financial auditing and tax obligations in the Real Estate and Construction industry.
Auditing activities in the real estate and construction industry are not limited to technical documentation but extend to the financial aspect. This includes, in particular, the recognition of revenue according to project progress (IFRS 15 or VAS 15) and the allocation of cost of goods sold to each real estate product.
Construction businesses often face risks related to input invoices from subcontractors. Auditors will review the legality of these invoices to ensure that the business does not have expenses disallowed during corporate income tax settlement. Regarding VAT, tax refunds for new investment projects also require thorough assessment through the Real Estate and Construction Industry Audit process.
The role of Real Estate and Construction Industry Auditing for Stakeholders
The presence of an independent auditing firm creates absolute trust between the investor, contractor, and credit institutions. This is especially important when raising capital through bond issuance or bank loans.
For investors
Real estate and construction auditing helps optimize capital flow, detect waste during construction, and provide accurate data for contractor final approval. It's a management tool that gives investors peace of mind regarding the transparency of the project management team.
For banks and investors
Providing objective evidence of the project's financial situation and actual progress, a Clean Real Estate – Construction Audit Report (Unqualified Opinion) is a passport for businesses to access large sources of funding with preferential interest rates.
Trends and Challenges in Real Estate and Construction Auditing
Currently, the State Audit Office is tightening its inspection of BT, BOT projects and real estate projects showing signs of violations regarding land use conversion. Therefore, businesses need to proactively conduct independent audits before receiving requests from the authorities.
| Characteristic | Independent Auditors (MAN) | State Audit Office |
| Target audience | Investor, Board of Directors | Government, Parliament |
| Main objective | Consulting and completing final settlement reports. | Review budget usage. |
| Time of execution | Throughout or at the end of the project | According to the annual plan |
| Legal value | Basis for approving the final settlement | The conclusion is binding. |
The application of BIM (Building Information Modeling) technology to real estate and construction auditing is becoming an inevitable trend. This technology allows auditors to access 3D data and automatically reconcile quantities, thereby minimizing errors caused by human factors.
Conclude
Auditing in the real estate and construction industry is a meticulous process requiring a deep understanding of both legal and construction engineering principles. Investing in auditing is not an expense, but an investment in the safety and reputation of the business in the market. A high-quality audit report will help businesses resolve bottlenecks in capital settlement, thereby unlocking cash flow for subsequent projects.
MAN – Master Accountant Network proudly stands as a leading provider of auditing services for the real estate and construction industry, tax accounting, and in-depth financial consulting. With a team of experienced auditors and engineers, we are committed to partnering with businesses to ensure data transparency, optimize tax obligations, and comprehensively manage risks. Contact MAN today to receive the most professional support for your project.
Service contact information at MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Frequently Asked Questions about Real Estate and Construction Auditing
When does a business need to conduct a Real Estate and Construction Industry Audit?
Businesses should conduct audits when a project is completed, whether for a specific component or at the end of the entire project, to facilitate capital settlement. Additionally, listed companies are required to conduct annual audits to disclose information as mandated by regulations.
How long does an audit typically take?
Depending on the project scale, for level II and level III projects, the timeframe is typically 30-60 working days after receiving all necessary documents.
How are audit fees for the real estate and construction industry calculated?
Audit fees are typically calculated as a percentage of the total investment or settlement value, in accordance with the fee schedule in Circular 09/2016/TT-BTC or an agreement between the two parties.
