Option A or Option B subcontracts do not require the vigorous verification of detailed accounting records compared to open book defined cost based contracts. However, on these subcontracts, there are still some common-sense verification rules and basic principles to follow in order to accurately assess the Price for Work Done to Date (PWDD).
This paper focuses on providing audit tips when reviewing Option A and Option B subcontract costs. Whilst they are both priced options, the risks are managed differently between Option A and B. The quantities in relation to the works under an Option B are remeasured, whereas there is price fixity against the activities under an Option A.
If you are reviewing a reimbursable subcontract (Option C, D or E), our previous R.E.V.I.E.W tip sheets on people, plant and materials, equipment etc, will aid your learning.
