Audit of Construction and Real Estate Industry Practice Test

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• Investing in real estate can be done directly in physical property or indirectly through managed funds. Which option best describes this approach?
• How should earn-out or contingent consideration arising in real estate acquisitions be accounted for on acquisition and subsequently?
• What risk factors are common in construction audits related to bills payable to subcontractors, and how would you test them?
• Which statement correctly contrasts the real estate industry with the construction industry?
• Under ITB and GAAP, which asset category should be identified for tenants who have vacated and terminated their lease during the year?
• This includes apartments, office and retail buildings, hotels, schools, public buildings, industrial and manufacturing buildings, highways and bridges, sewers, pipelines, power lines, power plants, and other civil engineering projects.
• One of their jobs is to represent either party and help them achieve the purchase or sale with the best possible team.
• The provisions on cancellation allow real estate developers to sustain their right to payment. Which option best reflects this idea?
• What disclosures relating to risk management practices are typically required in construction and real estate audit reports?
• Under GAAP, rent relief provided to tenants during COVID-19 is treated as if the relief was
• For non-residential building permits, how many permit issuances occurred in 2018?
• They include banks, private lenders, credit unions, and government institutions.
• The Metro Manila Subway Project is expected to cost around how much?
• Which entity is commonly involved in financing real estate projects?
• Which of the following is included in commercial construction?
• In 2018, permits issued for trade contractors were approximately?
• Which element is essential when disclosing tax considerations for REITs in different jurisdictions?
• Which statement best describes the relationship of lenders to real estate development?
• Under ITB, rent deferrals would primarily impact
• Four Types of Real Estate: Which option correctly lists all four types?
• How do contingent liabilities relating to guarantees or performance bonds affect financial statement disclosures in construction audits?
• How should work-in-progress be presented on the balance sheet depending on the accounting framework?
• What is the stated aim of building more infrastructure construction?
• What role do related party relationships play in construction and real estate audits, and what procedures help identify and disclose them?
• Under ITB, rent deferrals would primarily affect which aspect of the accounting?
• What is the difference between 'unbilled receivables' and 'retention' in construction accounting, and how should each be audited?
• A triggering event for asset impairment may include which of the following?
• Which factor is highlighted as a key characteristic that adds to the attractiveness of real estate markets?
• How would you audit deferred revenue or customer advances for pre-sales in property development?
• In auditing estimated costs to complete, which practice improves audit evidence?
• Which standard is specifically referenced for considerations related to revenue from contracts with customers?
• What are the typical disclosures required for leases in real estate audits under IFRS 16 or ASC 842?
• In auditing impairment of long-lived assets, what are the triggers and how do you calculate impairment loss?
• Which topic would be reviewed to understand the current status and forecast of operations?
• Under IFRS impairment testing, what is the recoverable amount?
• When should borrowing costs be capitalized for real estate development projects, and when should capitalization cease?
• Some of the jobs of property management firms include
• If external confirmations cannot be obtained for contractor payables or receivables, which approach should be followed?
• What is the final component in the sequence of how the real estate industry works?
• GAAP permits rent relief to be treated as if it was already included in the original lease agreement, enabling current-period recognition instead of modifying the lease.
• Which of the following is included in residential real estate?
• Which statement best describes the contrast between IFRS 16 and ASC 842 in lessee lease accounting?
• Which heading lists the best practices for management to prepare and support an audit?
• Within the private sector, the motivation to construct is driven by Build Build Build and what other factor?
• What should management verify regarding the auditor's secure site during planning?
• They play a role in helping real estate owners rent out the units in their buildings.
• In revenue recognition for real estate operators, which statement best describes the difference between IFRS and US GAAP?
• As of February 17, 2020, how many infrastructure flagship projects had been prepared by the public sector?
• For tenant-related assets, ITB and GAAP require identifying which categories when tenants vacate?
• It is considered as one of the best investments, globally. Which investment is this?
• How would you evaluate the reasonableness of estimated costs to complete on a construction contract for audit purposes?
• Under the Maceda Law, what remedy is provided when a buyer defaults?
• How should sell-down allowances or developer incentives be treated in revenue recognition under IFRS 15?
• They charge a fee which is a percentage of the rent to property owners.
• Which combination best reflects the major drivers for the real estate sector in the Philippines?
• Which department would enforce the majority of these infrastructure developments?
• In 2018, permits issued for general buildings were around?
• The current status of the enforceability position discussed in relation to revenue recognition is what?
• In ongoing negotiations with tenants or lenders, which item is typically involved?
• The demand is expected to rise due to growth in the number of multinational companies and a number of ______'s.
• In revenue recognition under construction contracts, which timing methods are typically considered?
• At the end of 2018, which area among the highly urbanized cities had a higher supply of condominium units compared to Alabang, Araneta Center, and Rockwell Center?
• Which factor determines whether revenue for a construction project is recognized over time rather than at a point in time under IFRS 15/ASC 606?
• Which statement best describes residential construction?
• How many infrastructure development projects would be managed by the Department of Public Works and Highways?
• What is the objective of the Maceda Law in relation to buyer defaults?
• Which of the following statements best describes financing activities in the cash flow statement for construction projects?
• Planning for audits in real estate should consider what factor that may cause delays?
• The most common real estate professionals who offers professional services in the industry include
• How are construction project cash flows classified in the statement of cash flows?
• Under the percentage-of-completion method, how is revenue recognized for a long-term construction contract and what is the common progress measure?
• What is the combined total number of infrastructure development projects managed by DPWH and DOTr?
• What are impairment indicators for land held for development?
• What is the purpose of transfer pricing review in intercompany real estate transactions?
• Which of the following is typically an effective source of evidence for confirming outstanding customer balances at period end in a real estate development audit?
• How should asset retirement obligations be recognized and measured in real estate development projects?
• For tenants who have vacated and terminated their lease during the year, which action is specified for deferred leasing costs under ITB and GAAP?
• How should intercompany real estate transactions and balances be audited, and what are typical risks?
• In real estate investing, which areas require a strong understanding to anticipate market changes?
• How many infrastructure development projects would the Department of Transportation manage?
• Extinguishment of debt under GAAP requires which treatment for existing deferred financing costs as of the extinguishment date?
• If cancellation is not properly preceded by cancellation steps, what is the status of the contract?
• Which term describes the two modes of investing in real estate described in the material?
• Which projects are eligible for capitalization of borrowing costs?
• Which statement is true about the numbers of projects managed by DPWH and DOTr?
• In auditing fair value measurements for investment properties, how should hierarchy levels be tested?
• Which project is identified as a flagship project in the infrastructure plan?
• Which two factors are cited as the main drivers of the real estate sector?
• When considering waiving payment rights in similar contracts, what does the discussion say about the entity’s right to payment to date?
• For vacant tenants, which statement describes the treatment of deferred leasing costs under both ITB and GAAP?
• What components constitute work-in-progress (WIP) for a construction contract, and how should it be presented on the balance sheet?
• The 573,000-square-meter office-space figure is associated with which sector?
• Under IFRS 15, revenue is recognized when control transfers to the customer. Which statement best reflects control transfer in construction projects?
• Under IFRS/US GAAP, when is equity method applied for investments in joint ventures or associates?
• In 2018, how many permits were issued for general engineering contractors?
• Asset impairment is not a consideration under which framework?
• Which two actions are identified as the government's challenges to shift developers toward socialized housing?
• Why is stage-of-completion documentation important for construction revenue recognition, and what evidence should be examined?
• Which document types should be provided to support year-end transactions such as lease amendments?
• Under GAAP, how are new costs incurred and paid directly to the lender treated in a loan modification?
• Which statement about lease accounting models is true?
• In 2018, general buildings permits were approximately how many?
• What disclosures are critical for contract assets and contract liabilities under IFRS 15?
• How should government grants or incentives related to real estate development be recognized under IFRS?
• Which sector occupied around 573,000 square meters of office space?
• Which of the following is NOT a listed use of industrial buildings?
• Real estate development involves which activities?
• How does consolidation of SPVs used in real estate development affect the financial statements, and when should equity method be applied?
• What is a recommended approach to validating the reasonableness of market data used in fair value assessments for real estate investments?
• Under ASC 606 / IFRS 15, how is revenue generally recognized for long-term construction contracts?
• Which procedures would you perform to validate fair value measurements for investment properties under IFRS?
• According to the new revenue standard, if the right to payment for performance to date remains enforceable, what happens to the entity’s right to payment?
• Since which year have building permits been on the rise?
• They help in facilitating a transaction between buyers and sellers of property.
• If the entity extinguishes or modifies its debt, management should
• Which item among the main industry issues addresses the differences between PAS 11 Construction Contracts and PFRS 15?
• Which professional is typically involved in drafting contracts and ensuring legal compliance in real estate transactions?
• Which balance sheet classification best describes unbilled receivables?
• What are key considerations when auditing land held for development versus inventory for sale?
• How should consolidation adjustments for intercompany profits on sales of property between consolidated entities be recorded and tested?
• In a year when real estate activity is unusual, which action could help make the year-end audit process more efficient?
• What act is commonly known as the Maceda Law?
• What was the 2016 count of non-residential licenses?
• What is the primary purpose of reviewing lien waivers in auditing subcontractor payables?
• What is the role of external confirmations in auditing construction contractor payables and receivables, and what risks exist if confirmations are not obtained?
• Which of the following is a subcategory of land real estate?
• Which statement best reflects an audit planning consideration?
• The demand is expected to rise due to growth in the number of ________ and a number of BPO's.
• Which combination of evidence sources is most effective for confirming estimates in construction and real estate audits?
• How should properties held for sale be measured and classified in the balance sheet?
• How should title risk and title insurance be addressed in real estate audits?
• Which accounting standards are shown as examples that may be delayed in adoption?
• Which is the first step in how the real estate industry works?
• What best describes the materiality concept in audit planning?
• Which IT controls should be tested at the project level in construction audits?
• What is the primary objective of risk assessment procedures in auditing construction and real estate entities, and which two industry-specific risk areas are typically most material?
• Which concept is always an audit consideration, especially in a pandemic context?
• Which item is listed as an audit consideration?
• What is a primary purpose of performing sensitivity analysis on major real estate projects in risk management disclosures?
• Which of the following is NOT a typical task of property management firms?
• Which term describes real estate that can be vacant land, ranches, or working farms?
• Strip malls, shopping centers, educational and medical buildings, hotels, and offices are typically categorized as which type of real estate?
• Real estate refers to property consisting of land and improvements such as fixtures, buildings, roads, structures, and utility systems.
• What is a recommended consideration regarding the current status of operations and regulatory issues?
• A NOT listed among the four types of real estate is:
• They play a huge role in the real estate industry since all properties and developments use debts to finance their business.
• What types of audit evidence are most effective for obtaining reliable estimates in construction and real estate audits, and what are common sources?
• What is a contract lien and how does it impact the audit of WIP and billings?
• Which two steps must be completed before cancellation of the contract to sell can be carried out?
• Which profession focuses on interior aesthetics and staging properties for sale?
• The remedies under the Maceda Law are based on which of the following?
• The 738,000-square-meter office-space figure was associated with which sector?
• In revenue recognition for construction contracts, how should penalties that are effectively liquidated damages be treated if they reduce revenue?
• What impact did the Build Build Build program have on licensing for building contractors?
• The industry that covers development, leasing, appraisal, marketing, and management of commercial, residential, agricultural, and industrial properties is called:
• How should lease incentives be accounted for in the lessee's financial statements?
• Which program has increased the number of licenses for building contractors in the Philippines?
• One of the big tickets in the infrastructure plan is which project?
• How should income taxes be disclosed for REITs or real estate entities with complex structures, and what are common tax considerations?
• How would you assess the accuracy of depreciation for property, plant and equipment in a real estate development company?
• Which investment is described as one of the best investments globally?
• Upon modification of a loan, how are existing deferred financing costs generally treated over the term of the modified loan?
• Which topic asks about the capitalization of costs incurred in contracts?
• PFRS 15 Considerations cover questions related to revenue from contracts with customers. Which item is a primary topic under these considerations?
• 'Billings in excess of costs and estimated earnings' is presented on the balance sheet as which of the following?
• Which question concerns identifying distinct goods and services within a contract?
• Under which framework should an impairment analysis be performed when a triggering event has occurred?
• In technical accounting considerations for real estate, which pair is referenced?
• Across the region, 738,000 square meters of office space were attributed to which sector?
• What is a key activity when updating internal control narratives during the year?
• The Realty Installment Buyer Act is formalized as which law?
• The 2018 condo supply among Fort Bonifacio, Makati, Bay Area, and Ortigas Center was higher compared to which area?
• Which group occupied only 379,000 square meters of office space?
• The vast majority of residential construction jobs include __________ such as adding a room or renovating a kitchen and bathroom.
• When measuring variable consideration under IFRS 15 for real estate sales, which approach is commonly used?
• Which is a use of industrial buildings?
• This includes both new construction and resale.
• Which area houses a large portion of office space in the country, especially for operations?
• What is the refund range that may be granted to a defaulting buyer under the Maceda Law?
• What is the significance of project-level controls in construction auditing, and which controls should be tested?
• What is the risk of revenue manipulation in long-term construction contracts, and how can it be detected?
• How can data analytics enhance audit effectiveness for work-in-progress (WIP) aging and change orders in construction projects?
• In 2018, permits issued for specialty contractors were around?
• Which of the following is NOT listed as a land subcategory in real estate?
• The Philippines real estate market is expected to post revenues by 2020 due to which factor?
• What indicators require impairment testing for real estate inventory and CIP, and what model is used to measure impairment under IFRS?
• The size and scale of the real estate market make it attractive because investors can invest which two ways?
• It is a firm with a team of real estate agents or realtors as employees.
• Buildings where goods are distributed are considered as which type of real estate?
• Deferred Financing Costs: When debt is extinguished or modified, the entity should
• The Maceda Law applies to what kind of sale in particular?
• Which procedure would you perform to test the accuracy and cut-off of revenue and costs around year-end for long-term construction contracts?
• A common category of residential real estate is __________.
• Which action helps manage access during planning discussions with auditors?
• The Maceda Law applies to which type of real estate transaction?
• Which of the following statements best describes the GAAP approach to rent deferrals during COVID-19?
• Which type of firm focuses primarily on sales and marketing work with developers to sell buildings and units they create?
• How should contract modifications/change orders be reflected in revenue and costs when auditing long-term construction contracts?
• Which statement is presented as a driver alongside market growth?
• Construction comprises of building, alteration, and/or repair.
• Cut-off testing around year-end for WIP and costs in construction projects is intended to verify which of the following?
• Why is materiality critical in planning audits of construction and real estate companies, and how should it be determined?
• What can land real estate include?
• Which category includes manufacturing buildings and warehouses?
• How would you evaluate inventory write-downs for real estate held for sale in a downturn scenario?
• Under ITB guidance, if tenants receive rent concessions, the entity would
• Residential construction refers to the building or renovation of dwellings.
• Who prepared the 100 infrastructure flagship projects as of February 17, 2020?
• Change orders in construction projects generally have what effect on revenue recognition?
• Which occupancy had the smallest office space at about 379,000?
• Metro Manila Subway Project would be managed by which department?
• Which of the following is typically considered commercial real estate?
• Industrial real estate includes properties used for manufacturing and distribution.
• What condition must be met for a buyer to be eligible for the refund under the Maceda Law?
• Under GAAP, for accounts receivable that may not be collectible, what should be recorded?
• What Republic Act number corresponds to the Maceda Law?
• Which statement is true regarding the ITB approach to rent concessions and revenue offset?
• How should environmental liabilities be accounted for and disclosed in real estate development audits?
• Which groups are typically involved in financing and development of real estate projects?
• It refers to any real property consisting of land and improvements such as fixtures, buildings, roads, structures, and even utility systems.
• What is the difference between fair value through profit or loss and amortized cost classifications for financial instruments under IFRS 9, and when would each apply in real estate audits?
• Are apartments commercial real estate or residential real estate?