You have been assigned to investigate possible fraud relating to a discrepancy in inventory in which...

You have been assigned to investigate possible fraud relating to a discrepancy in inventory in which management has informed you they suspect the warehouse assistant manager is involved because the balance in the inventory account has declined by 30% over the past year and the assistant manager has been acting "suspiciously". What type of evidence would you gather both from within the company and outside of the company to support management's theory? How would you determine if the evidence you gathered is relevant and reliable? How would you obtain the evidence based on applicable laws?

Expert Solution

Fact of the case

Management suspect that warehouse assistant manager involves in possible fraud relating inventory discrepancy at warehouse.
The balance in the inventory account has declined by 30% over the past year.
The assistant manager has been acting suspiciously.

Type of evidence require to investigate the issue

Stock/Inventory Register maintain at warehouse computer or ERP System
Procedure followed by warehouse staff for issue inventory.
Clearance certificate from competent authority to check whether warehouse have proper infrastructure and things to keep goods safe and intact.
Order book from procurement team.
Original sale and purchase invoice copy
Signed Delivery challan for goods issued form warehouse.
Recorded statement from people involved.

Relevancy and reliability of evidence collected

There are two ways to check whether Inventory register is correct or not,

First Physical counting of closing inventory and this should be matched with inventory register, second, we can get closing inventory by this formula

Closing Inventory= Opening inventory + Purchase – Inventory issued – wastage

Result should be matched with inventory register

By Checking for required procedure follow by warehouse staff for very inventory level.
Physical visit to warehouse to see whether condition is good fit for keeping inventory.
Verify all purchase are in line with procurement team requirement
Verify all inventory are issued as per requirement and cross check it with delivery challan with signature of authorised person

Obtaining the evidence based on applicable law

First acquired all document as per applicable company policy and obtain authority letter from higher management whenever applicable. Take approval of law whenever necessary and consult with lawyer.

ekkarill92 answered 2 years ago

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