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CS Professional · Internal and Forensic Audit · Special Points relating to Internal Audit in various Entities

An internal auditor of an NGO notes that a vendor, 'Sunrise Supplies', received payments just below the Rs 50,000 approval limit on 12 occasions in a month, with invoices of consecutive numbers and the vendor's address matching a staff member's residence. Which combination of procedures is most suitable to examine the possible fraud?

The best approach is data analytics to detect split payments and sequential invoices, combined with vendor master verification and confirmation of the vendor's existence and ownership. The red flags indicate bill splitting to avoid approval limits and a possible related or fictitious vendor, which only these targeted procedures test.

  1. ARatio analysis of the NGO's annual income and expenditure only
  2. BData analytics for split payments and sequential invoices, vendor master verification, and confirmation of the vendor's existence and ownershipCorrect
  3. CRecomputation of depreciation on the NGO's assets
  4. DReview of the NGO's mission statement and annual report

Explanation

Payments just under an approval limit suggest splitting, consecutive invoice numbers suggest a lack of genuine business, and the matching address suggests a related party or fictitious vendor. Analytics on payments plus vendor master checks and direct confirmation directly test these red flags. The other options do not address them.

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