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CS Professional · Internal and Forensic Audit · Fraud Detecting Techniques

While testing payables at Himalaya Foods Pvt Ltd, an internal auditor finds several invoices from one vendor, each just below the Rs 50,000 limit above which the purchase head's approval is required, raised within the same week. What is the most likely fraud indicator here?

The likely indicator is invoice splitting to evade the approval threshold. Several invoices from one vendor, each just below the Rs 50,000 limit and raised within one week, suggest a single purchase was broken up to avoid higher authorisation, so the auditor should investigate.

  1. AInvoice splitting to avoid the approval thresholdCorrect
  2. BPrepayment of insurance expenses
  3. CRevaluation of fixed assets
  4. DForeign exchange translation difference

Explanation

Invoices placed just under an approval limit in a short period suggest that a single purchase was split to bypass authorisation. Insurance prepayment, asset revaluation and exchange differences have no link with approval limits. The auditor should examine the vendor's relationship and the underlying goods received.

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