Dryden Company is an auto parts supplier. At the end of each month, the employee who maintains all of the inventory records takes a physical inventory of the firm’s stock. When discrepancies occur between the recorded inventory and the physical count, the employee changes the physical Count to agree with the records.
Required:
1. What problems could arise as a result of Dryden Company’s inventory procedures?
2. How could the internal control system be strengthened to eliminate the potential problems?