1.Mention some example of inventory fraud in term of management fraud and employee fraud!

Expert Solution

INVENTORY FRAUD

Inventories are the goods or materials that a business holds for the ultimate goal of resale. The theft of inventory is termed as inventory fraud. Inventory fraud are of two types; actual physical loss and financial statement fraud. Inventory fraud can be done through financial statement manipulation, such as; timing schemes, expenses recorded as inventory and valuation schemes.

EMPLOYEE THEFT/ FRAUD

Theft by employees results in an actual loss of inventory. Employees steals inventory for personnel use, for resale etc. Examples of inventory fraud in terms of employee draud are:

bringing baggage to/from work
recording high number of "no sales" transaction.
signing another employees name or signing illegibly on inventory documents.
frequent cash shortage or overages on the same employee's shift.
excessive loitering by off duty employees.

MANAGEMENT FRAUD

Inventory fraud can be done through financial statement manipulation by the management:

Fraud in timing schemes
manipulations in the valuation schemes
expenses recorded as inventory
overstatement of inventory
cost of goods sold is calculated by substrating the increase in inventory from purchases.

ekkarill92 answered 2 years ago

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