A study on financial_research

May 28th, 2015
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Abraham Lincoln University
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reported inventory balances appear too high or are increasing too fast reported cost of goods sold balances appear too low or are decreasing too fast reported purchase returns and discounts appear too high or are increasing too rapidly reported purchases appear too low for inventory levels

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FINANCIAL CONTROLS AND OPERATINGCONTROLS FORINVENTORY AND PURCHASESTRANSACTIONS &LONG TERM ASSETSInventory and Cost of Goods Sold FraudsInventoryincludesallthegoodsacompanyownsandholdsforsaleinthenormalcourseofoperations;itisamerchandisersmostimportantasset.CostofGoodssoldistheentityscostofitsinventorythathasbeensoldtocustomers.Itisthemerchandisersmajorexpense.Effect of Cost of Goods Sold on InventoryCostofGoodsSoldBeginningInventoryOverstated UnderstatedEndingPurchasesInventoryNoeffectNoeffect+PurchasesofinventoryNoeffectUnderstatedReturnsofinventorytovendorPurchasediscountsoninventorypurchasesNoeffectNoeffectNoeffectNoeffectGoodsavailableforsaleNoeffectUnderstatedEndinginventoryOverstatedNoeffectCostofgoodssoldUnderstatedUnderstatedIncomeStatementOverstatedInventoryGrossRevenues(sales)NoeffectSalesreturnsNoeffectSalesdiscountsNoeffectNetRevenues(sales)NoeffectCostofgoodssoldUnderstatedGrossMarginOverstatedExpensesNoeffectNetIncomeOverstated1PurchaseinventoryReturnYESgoods?NOYESTakediscount?2Returnmerchandisetosupplier3PayvendorwithindiscountperiodNO4Payv

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