Skip to content

CS Professional · Internal and Forensic Audit · Special Points relating to Internal Audit in various Entities

Nirmal Consultancy LLP bills clients on the basis of hours logged by consultants on timesheets. The internal auditor finds that timesheets are filled in by consultants and approved by the same consultants' team leaders after the month closes, with no link to project plans. What is the most significant risk arising from this?

The main risk is overstated or inflated billable hours, causing disputed client bills and misstated revenue. In a time-based consultancy, timesheets drive billing, so late filling, approval by closely linked team leaders and no reconciliation to project plans leave the process open to error and manipulation.

  1. AOverstated or inflated billable hours leading to disputed billing and revenue misstatementCorrect
  2. BUnderstatement of share capital
  3. CExcess stock of consumables
  4. DIncorrect depreciation on office furniture

Explanation

In a time-based service firm, the timesheet is the basis of revenue. Late preparation, no independent check and no link to project plans make inflation or errors in hours likely. The other options are unrelated to this control gap.

Did you get it right without looking?

One question tells you little. A timed set on Special Points relating to Internal Audit in various Entities shows your real accuracy, how long you take and where you lose marks.

Practise Special Points relating to Internal Audit in various EntitiesFree diagnostic mock

More Special Points relating to Internal Audit in various Entities questions