iCell Industries reported an increase in inventory for 2019. Alarmed by the abrupt upward trend and its impact on revenue, a Fraud Examiner was hired to determine if there is fraud.

The Fraud Examiner started its investigation on the annual physical inventory process in warehouse operation. He noted that a cycle count program had been installed in the storeroom beginning of the year in place of the disruptive process of counting one entire product line at the end of each month. The cycle count program appeared effective because only nine minor adjustments had been made for the entire year on the several thousand different products located in the storeroom. Further, the storeroom supervisor explained that each of the 15 stockroom personnel selected one item each day for cycle count based on how efficiently the item could be counted. If you are the Fraud Examiner:

1. Would you consider the cycle count program as effective? Why? 

2. Are there opportunities for fraud? If "Yes", provide control improvements to remedy the identified opportunities for fraud? 

Answer rating: 100% (QA)

ANSWER TO QUESTION 1 Based on the reasons given within the question I consider the cycle count progr... View the full answer