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CS Professional · Internal and Forensic Audit · Basic Concepts of Forensic Audit

A forensic auditor of Sundaram Pharma Ltd extracts all payments and finds that many invoices from one vendor are just below the Rs 50,000 limit above which the CFO's approval is needed. Which technique most directly flagged this pattern?

Data analytics testing for clustering just below approval thresholds flagged it. Analysing the distribution of payment values reveals invoices deliberately kept under the authorisation limit, a common sign of splitting to avoid senior approval.

  1. AData analytics testing for clustering just below approval thresholdsCorrect
  2. BPhysical verification of inventory
  3. CBank reconciliation of closing balance
  4. DConfirmation of share capital

Explanation

Examining the distribution of transaction amounts to see clustering just under authorisation limits is a data analytics red-flag test, indicating possible invoice splitting to evade approval. The other procedures do not analyse payment value patterns.

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