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CS Professional · Internal and Forensic Audit · Fraud Detecting Techniques

During a forensic review of Sunrise Textiles Ltd, the auditor notices that several vendor invoices are just below the Rs 50,000 approval limit and are issued by the same vendor on consecutive days. Which fraud-detection approach is most directly indicated by this observation?

Pattern analysis for split transactions is the right approach. Invoices just under an approval limit, from one vendor on consecutive days, suggest deliberate splitting to avoid authorisation, and analysing amounts, dates and vendors against thresholds exposes it. The other procedures address different assertions.

  1. APattern analysis for split transactions designed to avoid approval limitsCorrect
  2. BPhysical verification of closing inventory
  3. CRecalculation of depreciation on fixed assets
  4. DConfirmation of bank balances with the bank

Explanation

Several invoices clustered just below an approval limit and raised on consecutive days suggest invoice splitting to bypass authorisation. Analysing transaction patterns and thresholds is the technique that detects this. Inventory counts, depreciation recalculation and bank confirmations do not address approval-limit avoidance.

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