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CS Professional · Internal and Forensic Audit · Fraud Detecting Techniques

Forensic auditor Rohan receives a general ledger extract from Bharat Steels Ltd to run journal-entry tests. Before analysing, he reconciles the extract's total debits and credits and record count to the trial balance and system control totals. Why is this step most critical?

Reconciling the extract to the trial balance and control totals establishes that the data is complete and accurate. Without this validation, the analytics may omit entries or be based on altered data, making any conclusions on fraud or override unreliable.

  1. AIt reduces the number of journal entries to be tested
  2. BIt establishes completeness and integrity of the data so conclusions drawn from the analysis are reliableCorrect
  3. CIt removes the need to test the entries for management override
  4. DIt allows the auditor to rely on the entity's internal controls fully

Explanation

If the extract is incomplete or altered, the analytics may miss fraudulent entries or give false results. Reconciling control totals validates the population. It does not replace testing for override, nor does it prove controls are effective.

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