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CMA Final · Cost and Management Audit · Forensic Audit

During data analytics on a payables ledger of Sundaram Components Ltd, a forensic auditor notes that a large number of payments to one vendor are just below the Rs 50,000 limit above which a manager's approval is needed. Which fraud scheme does this pattern most strongly indicate?

Payments clustering just below an approval limit indicate payment splitting, also called structuring, used to avoid higher authorisation. Ghost employees concern payroll, lapping concerns customer receipts, and channel stuffing concerns sales inflation, so none of those fits a vendor payment pattern.

  1. APayment splitting to avoid approval thresholdsCorrect
  2. BGhost employee on payroll
  3. CLapping of receivables
  4. DChannel stuffing of sales

Explanation

Clustering of amounts just under an approval limit suggests invoices were structured or split to bypass authorisation. Ghost employees relate to payroll, lapping relates to concealing misappropriated receipts from customers, and channel stuffing relates to inflating sales. None of these fits a vendor payment pattern below a limit.

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