GICALE, DEANNA MAE T.

ACT1207 – Sec 5

WEBINAR: Audit of Real Estate and Construction

Speaker: Mr. Dan Paolo Regidor

a. Nature and Background

Real Estate Industry is a company that hold real estate to earn rentals
and/or for capital appreciation. This industry is a process that involves
purchasing of raw land or real property and use it for rental or capital
appreciation, renovations, and constructions of buildings and sometimes it
involves selling or leasing of a real estate property to the users. The real estate
industry is also responsible for developing mainly of residential subdivision,
construction of housing units and leasing activities. Under this industry, it is good
to invest in real estate industry because it has tax benefits, it is also a passive
income, and it could be easy to liquidate.

b. Relevant statistics and updates

The real estate industry also affects by the impact of COVID 19. The
implementation of community quarantines impacts the real estate properties by
having a decreasing number of demands under the residentials property. The
operation of all the real estate agents is highly affected as they are forced to
push through their work through online which is before they are always at the site
or malls to do their work and find a real estate client. Another impact of Covid 19
Pandemic under the business establishment is that many stores were forced to
close their operations because of decreasing numbers of customers which
resulted to a lot of lot vacancies.
 c. Key Audit and Accounting consideration

The Revenue Recognition is one of the audit matters that need to be

consider under real estate industry. Under revenue recognition, the auditor
should assess the probability of collection especially under lease property, they
should also look for the contract, its collectability, in order to establish the validity
and test whether there is a right or obligation between the customer and the real
estate company. Another thing that needs to consider under revenue recognition
is the application of the method used in measuring progress of completion. The
auditor should look whether the method used by the client is applicable whether
they should used output method or input method. Another thing that the auditor
should consider is the proper classification of the properties whereas in order to
properly classify the properties they need to consider first the applicable
accounting standards that is relevant each property.

Construction Industry

a. Nature and Background

Construction industry comprises of individual, and entities engaged in

building, alteration and/or repair. It composes two different types of construction:
the residential and commercial/industry construction. Houses, buildings, schools,
and other infrastructure are only some of the products of construction industry.
Not only that, it also includes in the new work of structures is the additions,
alterations, and repairs of the existing infrastructure. The construction usually
done and successful or coordinated by general contractors, whereas they are the
ones who are expertise in one type of construction such as residential and
 commercial building. They are the ones who is responsible for completing the
construction job and responsible for contacting sub-contractors that requires a
small and special constructions.

b. Relevant statistics and updates

In the Philippines, the construction industry is continuously growing. It is

growing because many international investors see a lot of potential in our country
to establish their businesses. Aside from that, it is also highly supported by
Government initiatives which then resulting to improvements of exporting, trading
and it gives high impact to our economy.

During Covid- 19 Pandemic construction industry also suffers from this.

Construction industry experienced some delay and cancellation of construction
projects. Lacking laborers or labor shortage also happened because of covid.

c. Key Audit and Accounting consideration

One of the audits and accounting considerations that need look for is the
determination of amount of revenue, costs, estimated costs to complete. All
these revenue and costs are subject to judgment and highly involvement of
estimates. The control that may conduct for the contract revenues is to review
the current estimates of revenue based on supporting billings. They can also
verify accuracy of percentage of completion, revenue, and costs.