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CS Professional · Internal and Forensic Audit · Internal Audit Tools and Techniques

An internal auditor at Hindustan Agro Ltd suspects fictitious vendors. Which sequence of procedures would give the most reliable evidence about whether a suspect vendor is genuine?

The best approach combines data matching of vendor master details with employee records and a physical visit with independent registration evidence. This relies on corroborated, external and auditor-generated evidence, which is more reliable than the clerk's assurance, year-on-year comparisons or budget approvals.

  1. AMatch vendor master address and bank account with employee records, then physically visit the vendor and obtain independent registration detailsCorrect
  2. BAsk the accounts payable clerk whether the vendor is genuine
  3. CCompare the vendor's total payments with last year's total
  4. DReview the board minutes for approval of the annual budget

Explanation

Data matching against employee records can reveal a conflict of interest, and a site visit with independent registration evidence corroborates existence from external sources. Asking the clerk is weak, and the clerk may be involved. Year-on-year totals and budget minutes do not test vendor existence.

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