CS Professional · Internal and Forensic Audit · Basic Concepts of Forensic Audit
Sundaram Pharma Ltd's accounts clerk, Ms. Iyer, creates a fictitious vendor, raises invoices in its name and gets payments credited to her own relative's account. She tells herself she is only taking what the company owes her for unpaid overtime. Which statement correctly maps the situation to the fraud triangle and fraud type?
Her belief that the company owes her overtime is rationalisation, and the fictitious vendor scheme is misappropriation of assets because company cash is diverted for personal gain. It is not fraudulent financial reporting, which involves misstating the financial statements, nor bribery-based corruption.
- AHer overtime belief is rationalisation, and the scheme is a misappropriation of assets (fictitious vendor fraud)Correct
- BHer overtime belief is opportunity, and the scheme is fraudulent financial reporting
- CHer overtime belief is pressure, and the scheme is corruption through bribery
- DHer overtime belief is rationalisation, and the scheme is fraudulent financial reporting
Explanation
Telling herself the company owes her money is a self-justification, which is rationalisation. Diverting company cash through a fake vendor is theft of assets, i.e. misappropriation, not manipulation of financial statements and not bribery. The options that call it financial reporting fraud or corruption misclassify the scheme.
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