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CS Professional · Internal and Forensic Audit · Practices related to Internal Auditing

While planning an audit of the accounts payable function at Lotus Retail Ltd, the internal auditor decides to run analytics on the vendor master to find vendors sharing the same bank account or address as employees. Which fraud risk is this planning step mainly designed to detect?

The test mainly detects fictitious vendor or conflict-of-interest fraud. When a vendor shares a bank account or address with an employee, it suggests the vendor may be fake or controlled by staff. The analytics do not relate to inventory valuation, depreciation or statutory filing delays.

  1. AMisstatement of closing inventory
  2. BFictitious vendor or conflict-of-interest fraudCorrect
  3. CDepreciation computation errors
  4. DDelay in statutory filing

Explanation

Matching vendor bank accounts and addresses with employee records is a standard data-analytic test for fictitious vendors and undisclosed related-party or conflict-of-interest dealings. It does not address inventory valuation, depreciation or filing delays.

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