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Inventory Fraud and Financial Reporting: A Review of Literature

Author

Listed:
  • Abiloro, T. O. M.Sc., ACA

    (Lecturer, Accountancy Department, Rufus Giwa Polytechnic, Owo Ondo state, Nigeria)

  • Adejuwon, A. M. M.Sc., FCA

    (Bursar, Rufus Giwa Polytechnic, Owo Ondo state, Nigeria.)

  • Folorunso, B. E. FCA

    (Chief Accountant , Bursary Department, Rufus Giwa Polytechnic, Owo Ondo state, Nigeria.)

Abstract

This paper investigates the effect of inventory fraud on financial reporting by taking into consideration some key elements inventory fraud such as double counting, capitalizing cost, cut-off problems, over estimating, bill and hold sales, and consigned inventory. This study carried out this conceptual work by considering and reviewing prior literatures from different continents extant literatures. The findings showed that once a closing inventory is misstated in the current year, it will be carried forward to the next year in which it will have a negative effect on the coming year profit. Therefore, the managers tends to continuously giving wrong value of inventory in order to meet up with the shareholders and potential investors expectations and thereby presenting a financial reporting that is bias because it’s not showing the true position of the company’s affairs. This will in turn having a negative effect on the company as a whole. The study recommends a constant rotation of employees handling inventory, a strong system of internal control, constant physical stock taking, installation of electronic surveillance and a good inventory fraud management system

Suggested Citation

  • Abiloro, T. O. M.Sc., ACA & Adejuwon, A. M. M.Sc., FCA & Folorunso, B. E. FCA, 2020. "Inventory Fraud and Financial Reporting: A Review of Literature," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 7(10), pages 164-170, October.
    • Handle: RePEc:bjc:journl:v:7:y:2020:i:10:p:164-170
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    References listed on IDEAS

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