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Give Some Examples of How a Merchandising Company Can Manipulate

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Essay

Give some examples of how a merchandising company can manipulate earnings through its year-end inventories. What can an auditor do to detect this type of manipulation?


Definitions:

Net Income

The concluding income of a company after removing the costs and taxes from its revenue.

Average Total Assets

The mean value of all the assets a company owns, calculated by adding the beginning and ending total asset balances during a period and dividing by two.

Earnings Activities

Activities that generate income for a business, including operations, sales, and investments.

Revenues

The overall sum of money a company earns from selling products or delivering services over a specific time frame.

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