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CA Final · Advanced Auditing, Assurance and Professional Ethics · Due Diligence, Investigation & Forensic Accounting

During a forensic investigation at Kaveri Textiles Ltd, CA Rohan finds that the purchase manager created a fictitious vendor and approved invoices that were paid into an account the manager controls. Under the fraud triangle, the manager's belief that the purchase approval controls are weak and that nobody reviews vendor creation best corresponds to which element?

The element is opportunity. Weak purchase approval controls and no review of vendor creation give the manager the means to commit the fraud undetected. Pressure relates to financial need or incentive, and rationalisation relates to the person's self-justification, neither of which is described here.

  1. APressure
  2. BOpportunityCorrect
  3. CRationalisation
  4. DConcealment

Explanation

The fraud triangle consists of pressure (incentive), opportunity and rationalisation. Weak controls and lack of review of vendor creation give the person the chance to commit and hide the fraud, which is opportunity. Pressure would be a personal financial need, and rationalisation would be the self-justification of the act.

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