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CMA Final · Cost and Management Audit · Forensic Audit

In a forensic audit of a manufacturing firm, the investigator finds that the same purchase invoice was paid twice, once through cheque and once through bank transfer. In the fraud triangle, which element does the investigator test by examining weaknesses in payment approval and reconciliation procedures?

Reviewing payment approval and reconciliation procedures tests opportunity. Opportunity is the element of the fraud triangle that arises from weak internal controls. Pressure and rationalisation concern the individual's personal circumstances and attitude, not the control environment.

  1. APressure on the employee
  2. BOpportunity created by weak controlsCorrect
  3. CRationalisation by the employee
  4. DMotive arising from personal debt

Explanation

The fraud triangle has three elements: pressure, opportunity and rationalisation. Weak approval and reconciliation procedures are control gaps that let a fraud occur, so they relate to opportunity. Pressure and rationalisation are personal, behavioural factors and are not tested by reviewing payment controls.

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