The popular press has indicated that inventory fraud is one of the biggest reasons for the proliferation of accounting scandals.
(a) Name two other high profile cases where a company has committed fraud by misstating inventory.
(b) What makes the intentional misstatement of inventory difficult to detect? How was Phar-Mor successful in fooling Coopers & Lybrand for several years with overstated inventory?
(c) To help prevent or detect the overstatement of inventory, what are some audit procedures that could be effectively employed?