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CS Professional · Internal and Forensic Audit · Basic Concepts of Forensic Audit

In a forensic review of Mehta Pharma Ltd, the auditor finds that payroll lists 12 employees sharing the same bank account number and none of them has any attendance record. The auditor wants to establish whether these are fictitious employees. Which combination of procedures is most likely to produce conclusive corroborative evidence?

The best approach is to physically verify the employees against HR records and trace the salary credits to the account holder through bank statements and KYC. This links the payments to a beneficiary and gives corroborative evidence, which analytical comparisons or software documents cannot provide.

  1. ARecomputing total payroll cost and comparing it with the budget
  2. BReviewing the payroll software licence agreement
  3. CPhysically verifying the employees with HR records, and tracing salary payments to the account holder through bank statements and KYCCorrect
  4. DComparing salary growth with industry averages

Explanation

Ghost employee fraud is confirmed by linking the payments to a real person: physical verification against HR files, and tracing the bank account to its beneficiary through statements and KYC. Budget comparison and industry benchmarks are analytical only and would not identify the beneficiary. The licence agreement is irrelevant.

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