Page 24 - Internal Auditor M.E. - June 2019

construction audit

BY: Tauseef Ahmed
Auditing Variations

Maturity of an organization is vital to determine the modus (e) any additional work, plant, materials or services necessary
operandi of an audit. An organization with robust procedures for the permanent works, including any associated tests on
and established systems, creates new opportunities for auditor to completion, boreholes and other testing and exploratory
perform his/her duties with utmost efficiency but carries different work. or
level of challenges. For a less mature organization, having outdated (f) changes to the sequence or timing of the execution of the
procedures, manual processing and undefined strategy may works.
create more challenging task for an auditor to perform. In such Note: Variation Orders or Change Orders are interchangeable
circumstances, if not effectiveness, having an impact on efficiency terms.
is unavoidable.

Understanding Types of Variations
What is a Variation
Prior to Auditing variations to the contract, understanding the
The Clause 1.1.6.9 of FIDIC (Red Book) defines ‘Variation’ as any basic concept thereof is essential. Variations are amendments to
change to the works which is instructed or approved as a variation the original contractual scope and if not administered properly,
under clause 13 (Variations and Adjustments). can create disagreements and disputes. Therefore, variation is
generally covered in majority standard construction contracts and
As per Clause 13.1 of FIDIC Red book, each Variation may provide liberty to the contracting parties, to amend the scope as
include: per changes in the requirements or circumstances.
(a) changes to the quantities of any item of work included in As a first step, an auditor needs to understand the contractual
the Contract (however, such changes do not necessarily terms and conditions governing variations. A variation can be
constitute a Variation). initiated by the Employer, Engineer, Contractor or subcontractor
(b) changes to the quality and other characteristics of any item due to change in requirement, circumstances or sometimes
of work. opportunity framing.
An auditor needs to develop his understanding over various
(c) changes to the levels, positions and/or dimensions of any
part of the works. types of variations. Construction contracts carry specific
uniqueness having different nature, type or complexity and the
(d) omission of any work unless it is to be carried out by others. parties involved have their own understanding or interpretation

24 INTERNAL AUDITOR - MIDDLE EAST JUNE 2019