Audit procedures for construction contracts involve several steps to ensure the accuracy and reliability of financial reporting. Here's a brief overview:

Understanding the Contract: The auditor needs to understand the terms and conditions of the construction contract, including the scope of work, contract price, variations, and any special provisions.

Assessing Revenue Recognition: Auditors must evaluate whether revenue from construction contracts is recognized in accordance with the applicable accounting standards, typically based on the percentage$-$of$-$completion method or completedcontract method.

Evaluation of Costs: Auditors review the allocation of costs to construction contracts to ensure they are properly recorded and allocated, including direct costs, indirect costs, and any overheads.

Assessment of Progress: The auditor verifies the progress of construction activities by inspecting work completed, reviewing invoices and payments, and comparing actual progress to the estimated completion percentage.

$.$ Evaluation of Contingencies: Auditors assess any contingencies related to construction contracts, such as claims, disputes, or penalties, to determine if they are appropriately recognized and disclosed.

Review of Disclosures: Auditors examine the adequacy and accuracy of disclosures related to construction contracts in the financial statements, ensuring compliance with accounting standards and regulatory requirements.

Now, here's your objective type question:

Which method is commonly used for recognizing revenue from construction contracts?

a$)$ Completed$-$contract method

b$)$ Percentage$-$of$-$completion method

c$)$ Straight$-$line method

d$)$ Cash basis accounting