What Kind of Error or Fraud Could Happen If the Inventory

question 32

Essay

What kind of error or fraud could happen if the inventory warehouse manager also had responsibility for making the physical inventory count and reconciling discrepancies to the perpetual inventory records?

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Definitions:

Gross Profit

The difference between sales revenue and the cost of goods sold before deducting overheads, payroll, taxation, and interest payments.

Periodic Inventory System

An inventory accounting system where stock levels are updated at regular intervals, not continuously.

Gross Profit

Gross profit is the difference between sales revenue and the cost of goods sold, indicating how efficiently a company is producing or sourcing its products.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, showing revenue, expenses, and net income.