An auditor is conducting an audit of a company's financial statements. As part of the audit, the auditor is reviewing the company's bank statements to ensure that all transactions are accurately recorded in the company's

To investigate this discrepancy (a payment of ₹ 10 lakhs to a vendor that does not match), the auditor uses cross referencing to compare the bank statement with the company's accounting records. Cross referencing is an audit technique used to compare and match data from different sources to ensure accuracy and completeness. The auditor identifies the check number on the bank statement and searches for it in the company's check register. The auditor finds that the check was issued to a different vendor for a different purpose than the one recorded on the bank statement. The auditor then reviews the company's invoices and purchase orders to determine if there were any other payments made to the vendor listed on the bank statement. The auditor discovers that the vendor did provide services to the company, but the payment was not recorded in the accounting system. Based on these findings, the auditor concludes that the payment was made to the vendor for services rendered and that the payment should be recorded in the company's financial statements. The auditor then makes the necessary adjustments to the financial statements to reflect the correct amount of the payment. In this case, cross referencing helped the auditor to identify a discrepancy between the bank statement and the accounting records, and to investigate the cause of the discrepancy. By comparing and matching data from different sources, the auditor was able to ensure the accuracy and completeness of the financial statements, and to identify any errors or omissions that needed to be corrected.