An Organization Contracted a Third Party to Construct a New

question 160

Multiple Choice

An organization contracted a third party to construct a new facility that was estimated to cost $25 million. Which of the following is the most pertinent reason for the organization to audit the contractor's records?

• A) The contract includes a right-to-audit clause.
• B) The contractor will be paid on a cost-plus basis.
• C) The estimated cost is high.
• D) The contractor has subcontracted much of the work.

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Definitions:

Fee-For-Service Basis

A payment model where services are unbundled and paid for separately, commonly used in healthcare sectors.

For-Profit Organizations

Entities that operate primarily to generate financial profit for their owners or shareholders.

HMOs

Health Maintenance Organizations, a type of health insurance plan that limits coverage to care from doctors who work for or contract with the HMO.

PPOs

Preferred Provider Organizations, a type of health plan that contracts with medical providers to create a network of preferred doctors and hospitals for its members.