Perth home builder Builton Group was trading while insolvent for several months last year before administrators were called in, but was given a clean bill of health by WA’s Building Commission.
The commission audited Builton in November and the company went into administration in January, stopping work on more than 100 building sites around Perth, owing millions of dollars to creditors and leaving dozens of staff unemployed.
Director of compliance Sandy Randall said the commission would try to impose disciplinary action on Builton's director and seek to have him declared ineligible to hold such a role.
Ms Randall said there were thousands of registered builders in WA and it was hard to fully scrutinise the financial status of all of them.
"It's frustrating for us as much as anybody else," she told ABC radio.
"The ability for us to do comprehensive financial checks of every builder at the time of their initial application or renewal would be quite onerous if we did that in every case.
"We use indicative evidence that they meet their requirements under the act."
That could be a declaration from an accountant or a certificate of eligibility from home indemnity insurers, who do comprehensive checks, she said.