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CS Professional · Internal and Forensic Audit · Internal Audit of Specific Functions

While testing purchases at Ganga Foods Pvt Ltd, an internal auditor notices many orders of ₹4,90,000 each to one vendor, just below the ₹5,00,000 limit that needs the Purchase Committee's approval. Which fraud indicator is most likely?

The pattern most likely indicates order splitting. Placing repeated orders just below the ₹5,00,000 approval threshold with one vendor suggests a larger requirement is being divided to avoid higher-level approval, which is a classic red flag the auditor should investigate.

  1. AOrder splitting to avoid approval limitsCorrect
  2. BNormal volume discounting
  3. CTimely deposit of statutory dues
  4. DProper rotation of vendors

Explanation

Repeated orders just under an approval threshold to one vendor suggest a large requirement is being split to bypass the committee. Volume discounts would not need amounts clustered below the limit. The other options are good practices.

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