CS Professional · Internal and Forensic Audit · Internal Audit of Specific Functions
An internal auditor reviews a capital project of Godavari Power Ltd. approved for ₹50 crore. Actual spend reached ₹62 crore, with the extra ₹12 crore sanctioned by a manager lacking authority beyond ₹5 crore overrun, and several vendor payments were split just below individual approval limits. Which finding is the most significant control weakness to report?
The most significant weakness is the breach of delegation of authority combined with splitting vendor payments below approval limits. The ₹12 crore overrun exceeded the manager's ₹5 crore power, and splitting bills is a recognised red flag for control circumvention and possible fraud.
- AAbsence of a fixed asset tagging policy
- BBreach of delegation of authority along with bill splitting to bypass approval limitsCorrect
- CUse of straight-line depreciation for the project assets
- DDelay in preparing the project completion report
Explanation
The overrun of ₹12 crore exceeds the manager's ₹5 crore authority, and splitting payments to stay below limits is a classic red flag for circumvention of controls and possible fraud. The other points are lesser or unrelated to the facts given.
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