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CS Professional · Internal and Forensic Audit · Internal Audit: Introduction and Overview

Internal auditor Meera at Himalaya Steels Ltd. notices that month-end vendor payments cluster just below Rs 5,00,000, the limit above which the CFO's approval is needed, and several are to related-sounding vendors. She has not yet confirmed any loss. What should she do first as part of her role?

She should extend testing on the clustering pattern, document the evidence and report through the established channel to the Audit Committee or senior management. Payments just below an approval limit are a red flag, but conclusions require evidence, so neither ignoring it nor confronting staff or reporting externally at once is appropriate.

  1. AReport fraud to the regulator immediately without further work
  2. BIgnore the pattern since each payment is within delegated limits
  3. CExtend testing to the pattern, document evidence, and report the matter to the Audit Committee or senior management as per protocolCorrect
  4. DConfront the accounts officer and demand a confession

Explanation

Payments just under an approval threshold are a red flag of possible split transactions or control override. The auditor should perform further procedures, preserve evidence and report through the established channel. Immediate external reporting is premature, ignoring it fails the duty of care, and a confrontation risks tainting evidence.

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