Question

Which of the following engagement procedures is most likely to detect the fraud?

A. Perform a bank reconciliation and account for all outstanding checks.
B. Trace a sample of receiving documents to invoices and to checks disbursed.
C. Take a sample of paid invoices and verify receipt of services by departments involved.
D. Trace a sample of checks disbursed to approved invoices for services.

Answer 1

Option D, tracing a sample of checks disbursed to approved invoices for services, is the most likely engagement procedure to detect fraud.

Step-by-step explanation:

Out of the given options, option D is the most likely engagement procedure to detect fraud.

Tracing a sample of checks disbursed to approved invoices for services allows auditors to verify that the payments made were for legitimate services rendered.

This procedure helps identify any discrepancies or irregularities between the checks disbursed and the approved invoices.

It ensures that payments are made for actual services and not to fraudulent individuals or companies.

Example: Let's say a company receives an invoice for services rendered, and the amount is $5,000.

he auditor can trace a sample of checks disbursed to ensure that the payment is accurately recorded and matches the approved $5,000 invoice.

If there are any checks disbursed for a different amount or without an approved invoice, it could indicate fraudulent activity.