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CS Professional · Internal and Forensic Audit · Fraud Detecting Techniques

During a forensic review, an auditor at Sundaram Textiles Ltd notices that several vendor payments are just below the Rs 50,000 approval limit and are made to the same vendor within a week. Which fraud detection approach is most directly being applied when the auditor investigates this pattern?

The auditor is analysing transactions for red flags and anomalies. Repeated payments just below an approval limit to one vendor suggest invoice splitting to avoid authorisation, and identifying such unusual patterns is a core exception-based fraud detection approach.

  1. AAnalysing transactions for red flags and anomalies that indicate possible split invoicingCorrect
  2. BConfirming the closing bank balance with the bank
  3. CObserving physical stock-taking at the warehouse
  4. DRecomputing depreciation on fixed assets

Explanation

Payments clustered just under an approval threshold to one vendor are a classic red flag for split transactions meant to bypass authorisation. Spotting and following up such anomalies is an exception-based fraud detection approach. The other options are routine audit procedures not aimed at this pattern.

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