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CS Professional · Internal and Forensic Audit · Fraud Detecting Techniques

A forensic auditor at Bharat Components Ltd runs a test on the payroll master file and finds three employees sharing the same bank account number and no leave records. Which type of fraud risk does this red flag primarily point to?

The red flag points to ghost employees. Several payroll records crediting one bank account, with no leave or attendance history, suggest fictitious persons created so that salary can be diverted. Matching payroll master data against bank details and attendance is the detection technique used.

  1. AGhost employees on the payrollCorrect
  2. BUnderstatement of revenue
  3. COverstatement of closing stock
  4. DMisclassification of capital expenditure

Explanation

Shared bank accounts and absence of leave or attendance records are classic indicators of fictitious employees, whose salaries are diverted to one account. The other options relate to revenue, inventory or classification frauds, which this data does not suggest.

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