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CS Professional · Internal and Forensic Audit · Fraud Detecting Techniques

An auditor at Narmada Retail Ltd uses a test that compares each vendor's invoice amounts against the average and standard deviation for that vendor, flagging invoices far above the usual range. Which technique is this?

This is outlier or statistical analysis. It calculates measures such as the mean and standard deviation for each vendor and flags invoices that fall far outside the usual range, which may indicate inflated billing, errors or fraud needing follow-up.

  1. AGap analysis
  2. BOutlier or statistical analysisCorrect
  3. CCut-off testing
  4. DVouching to supporting documents

Explanation

Using mean and standard deviation to flag values lying far from the normal range is outlier (statistical) analysis. Gap analysis checks sequences, cut-off testing checks period allocation, and vouching traces entries to documents.

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