Froud

Fraud in Ending Inventory

Student Name

Institution

Fraud in Ending Inventory

This is fraud that involves theft of inventory items. The act is usually carried through manipulating the inventory records or physical stealing of already finished goods. Theft of stock in business is very common this is because the items are readily accessible, numerous and can be removed easily by both employees and outsiders.’ The fraud is triggered by lack of security-Items are readily available to any employee and requisition is done without authorization. End inventory fraud causes loss to a business’ (Carland, 2003). The loss is normally detected during inventory records taking done at the end of period. The records are altered in order to hide the loss. This is usually done using the following methods:

➢ False Stock Taking.

➢ Perpetual Record Schemes.

➢ False write-offs as scrap items.

“End inventory is never safe either from employees or outsiders” (Albrecht, 2012). The value of ending inventory can be raised upward by overstating the amount of inventory at hand. Unit costs assigned to ending inventory can also be inflated or scrap is included in the ending stock taking count (Crosson & Needles, 2011). 

Strict measures should be developed and implemented to curb this unethical practice. The measures taken should be able to prevent and detect inventory fraud. In an attempt to find this fraud, the employee responsible for stock taking should fully explain suspicious entries in the stock records, Rates of inventory turnover should be compared from time to time and any alterations to inventory related document should have sufficient authorization (Crosson & Needles, 2011).

End inventory fraud is one of the damaging types of fraudulent act that continues in every business and it has great effect on financial statements and stake holders. Fraud examiners should look for ways to detect it. Businesses affected by this...