Assume the internal auditor has assessed that the potential is high that some purchase agents are involved in a kickback scheme with vendors who have received preferential treatment. The purchasing agents are receiving gifts or cash payments directly from the vendors for steering new contracts their way, or negotiating purchase prices higher than could be obtained elsewhere. The auditor has limited, but as yet unverified, information that some specific purchasing agents have been living a rather lavish lifestyle.

Required

a. What controls would be effective in preventing kickback schemes?

b. What audit procedures might be used to determine whether the purchase agents might be involved with kickback schemes? Be specific in your procedures. Identify all evidence to be gathered (internal and external), populations from which you will sample, and the specific documentations you will examine.