26 Apr

Construction Fraud and Forensic Accountants

What kinds of things can forensic accountants be involved in relative to construction fraud? A common area of fraud involves a general contractor using funds from a project to fund other projects. Also common is the construction company claiming a project is further along than it really is in order to get paid more than it is entitled to.

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When a construction project is delayed, the forensic accountant may be retained to calculate the losses due to the delay. This can get complicated if it involves unabsorbed home office overhead, which might be calculated using the Eichlay Formula.

Construction companies and general contractors need to be careful with the financial portion of the business. I have seen contractors run out of money on a project and use money received for a new project to help finish an old project. A Ponzi scheme is created where the contractor is always looking for new sources of money to fund old projects. Unraveling a situation like this is a great project for a forensic accountant.

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