From time to time, business news will report that the management of a company has misstated its

Question:

From time to time, business news will report that the management of a company has misstated its profits by knowingly establishing an incorrect amount for its ending inventory.

Required:

1. Explain how a misstatement of ending inventory can affect profit.

2. Why would a manager intent on misstating profits choose ending inventory to achieve the desired effect?

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...