There are three key criteria a client should look for. First, a formal methodology based on international auditing standards; second, qualified auditors; and third, independence.
To ensure consistency and a meaningful output, there should be a formal methodology which auditors follow. It should demonstrate how the audit work is planned, delivered, recorded, reviewed and reported on. The most robust approach is that set out in the International Standards on Auditing (ISA) (IFAC, 2018), which is accepted as best practice recognised throughout the world.
The methodology incorporates the identification and assessment of risks through understanding the NEC contract and its environment. To be meaningful this can often include a review of your NEC contractor’s accounting system and an in-depth analysis of transactions taken from its accounting systems as well as a review of the contract and structured interviews with stakeholders.
The standards require a professionally qualified auditor to interpret and apply them. We often see people without appropriate auditing and assurance qualifications, for example quantity surveyors or engineers, conducting a very basic 10% substantiation approach to audit. While this may provide a client with some confidence they are paying the right amount, it should not be relied upon and often misses significant issues.
Cost checkers should be free and be seen to be free of anything which may detract from their independence and ability to raise concerns. The existence of conflicts of interest will undermine cost-checking activities as any concerns may be suppressed.
If your cost-checking activity is based upon the ISA, which includes a risk assessment, and is it being conducted by independent, qualified auditors, then it should provide confidence you are paying the right amount.