CMA Final · Cost and Management Audit · Forensic Audit

During a forensic review of a company, an auditor finds that a payroll clerk is paying salaries to employees who left the organisation and the money is credited to accounts controlled by the clerk. Which type of fraud is this, and which control would most directly prevent it?

This is ghost employee fraud, a form of asset misappropriation. It is best prevented by reconciling payroll with HR records and requiring independent approval of employee master data changes, along with segregating HR and payroll duties.

AFinancial statement fraud; rotation of statutory auditors
BGhost employee fraud; HR-payroll reconciliation with independent approval of master data changesCorrect
CSkimming of sales; surprise cash counts
DBribery of customers; vendor rotation

Explanation

Paying salaries to non-existent or departed employees is ghost employee fraud, an asset misappropriation scheme. The most direct preventive control is segregating HR and payroll duties, reconciling the payroll with HR records and having master data changes approved independently. Skimming concerns sales receipts, and the other pairings do not match the scheme.

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During a forensic review of a company, an auditor finds that a payroll clerk is paying salaries to employees who left the organisation and the money is credited to accounts controlled by the clerk. Which type of fraud is this, and which control would most directly prevent it?

Explanation

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