Misappropriation of Assets- Inventory Fraud



Misappropriation of Assets- Inventory Fraud

Introduction

Inventory fraud is the most common issue that has faced by many societies globally. The fraud cases, especially on misappropriation of assets have adversely affected the company due to which numerous company employees have faced turmoil situation. The misappropriation of inventory has weakened the company financial position due to which he lost his markets hares and values among other competitors. Though, the epitome of misappropriation has critically defined the act of misappropriating or turning to a wrong appropriation or purpose. According to Black or Webster Dictionary, the terms have significantly defined as an appropriate wrongly by embezzlement or unfair act.

The inventory fraud cases have observed in any society. Mostly it happens in conglomerate organization where the cash flow of profit or gain is at the pinnacle. Thus, the possibility of inventory fraud has at excessive scale that critically enhances the occurrence of this misleading act. Many researchers have critically diagnosed the inventory fraud of many companies from all over the world. They further discussed that how they trap companies inventory accounts. The inventory fraud has at the pinnacle from last many years, and many organizations have countenanced this situation from last many years(Song, et.al, 2013).

Discussion

Misappropriation of Inventory

Misappropriation in inventory is one of the most significant crimes in assets which are more vulnerable to robbery and theft. This approach is totally under the possession of some employees especially the top management level that has full authority to scrutinize the accounts of inventory, and they can make their own accounts by stealing or make illegal contacts with third parties. Companies can influence in the account by rising the quantity of the account in arrange to show additional inventory in their monetary statement to convince obtainable investors about management's performance and to attract more investors. In fact, no one have an authority to ask the top management level people about their financial statement. They usually add more expenses by adjusting on some other factors. This advance method of inventory exploitation is very simple to pursue because the organizations can inquire the employees who are accountable for an account to modify the quantity of inventory by altering inventory's journal entries(Singleton & Singleton, 2010).

They also can make fake buy regulate such as shipping data that usually comprises of multiple factors including (send to, transporter, shipping time, amounts shipped...act). This type of fraud, the auditor who does not have any direct contact to the company can make sure about the past inventory quantities. The main reason behind that, the independent auditor usually follows the financial statement in which the amount of every small thing that has associated or purchase for the company is listed. It depends on the account charger or holder to adjust amount according to their feasibility level. The independent auditor can guarantee about the inventory measures by using inventory physical count method, which is allowable auditors to be familiar with the exact quantities of inventory. They frequently belief on the output ...