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CS Professional · Internal and Forensic Audit · Emerging Issues and Challenges

Nirmal Retail Ltd's internal auditor extracts the employee master and vendor master from the ERP. A match of bank account numbers shows that three vendors share accounts with serving employees, and payments to them were approved by the same employees. Before reporting, what should the auditor do first regarding the analytics output?

The auditor should first validate the data's completeness and accuracy, corroborate the matches with source records, and then escalate under the fraud response protocol. Tipping off vendors, discarding the results or circulating names widely would compromise evidence and confidentiality in a potential conflict-of-interest fraud.

  1. AImmediately inform the vendors and suspend their accounts
  2. BValidate the data completeness and accuracy, then corroborate the matches with source records and escalate per the fraud protocolCorrect
  3. CDelete the matches as false positives since analytics are unreliable
  4. DPublish the names in the general audit committee circular

Explanation

Analytics output must rest on complete and accurate data and be corroborated with source documents such as vendor files and approvals. Findings are then escalated confidentially through the fraud response process. Alerting vendors may compromise evidence, discarding results ignores a serious red flag, and wide circulation breaches confidentiality.

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