CS Professional · Internal and Forensic Audit · Audit and Investigations
During a fraud investigation at Orion Retail Ltd, the forensic auditor compares the lifestyle and bank deposits of a store manager with his declared salary and known sources of income. Which technique is this?
This is net worth analysis, an indirect method that compares a person's assets, spending and deposits with known legitimate income to reveal unexplained wealth. It differs from walk-through tests, bank reconciliations and inventory analysis, which do not measure personal income against lifestyle.
- ANet worth analysisCorrect
- BWalk-through test
- CBank reconciliation
- DAnalytical review of inventory turnover
Explanation
Net worth analysis estimates a person's assets and spending against known income to find unexplained wealth, which may point to illicit gains. A walk-through traces one transaction through a process, a bank reconciliation matches book and bank balances, and inventory turnover analysis reviews stock efficiency.
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