CS Professional · Internal and Forensic Audit · Fraud Detecting Techniques
The internal audit team of Himalaya Retail Ltd uses software to extract all journal entries posted on Sundays, after midnight, or with round-rupee amounts, and then examines them. This approach is best described as which of the following?
This is targeted journal entry testing based on fraud risk criteria. Entries posted at odd times or with round amounts are known indicators of possible override or manipulation, so selecting them deliberately is more effective for detecting fraud than random sampling or inquiry alone.
- ASubstantive confirmation of receivables
- BTargeted journal entry testing using specific fraud risk criteriaCorrect
- CRandom attribute sampling for compliance
- DInquiry-only walkthrough of controls
Explanation
Selecting entries by criteria such as unusual timing and round amounts is targeted journal entry testing. These characteristics are recognised indicators of management override or manipulation. It differs from random sampling because selection is driven by risk characteristics, not chance.
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