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CA Final · Advanced Auditing, Assurance and Professional Ethics · Due Diligence, Investigation & Forensic Accounting

While auditing Kaveri Textiles Ltd., the auditor notices that a purchase manager, Mr. Rao, approved invoices just below the Rs 5 lakh approval limit from a vendor whose address matches Mr. Rao's relative. In the context of the fraud triangle used in forensic accounting, which combination correctly maps the elements?

In the fraud triangle, pressure is the personal motive such as financial need, opportunity is the control weakness allowing the act, here weak approval and vendor onboarding controls, and rationalisation is the offender's self-justification such as feeling underpaid. Control features themselves are not pressure or rationalisation.

  1. APressure: approval limit; Opportunity: relative's address; Rationalisation: invoice amounts
  2. BPressure: personal financial need; Opportunity: weak control over approvals and vendor onboarding; Rationalisation: the offender's justification such as feeling underpaidCorrect
  3. CPressure: vendor master file; Opportunity: personal financial need; Rationalisation: internal audit
  4. DPressure: segregation of duties; Opportunity: rationalisation; Rationalisation: related party

Explanation

The fraud triangle has pressure (motive, such as financial need), opportunity (control weakness enabling the act) and rationalisation (the perpetrator's justification). Approval-limit splitting and weak vendor onboarding are opportunity factors. The other options assign control features or evidence as pressure or rationalisation, which is incorrect.

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