Final answer:
The most likely indicator of fraud involving inventory overstatement is a decrease in inventory turnover ratio, it suggests that inventory is being reported as higher than what is being sold.
Step-by-step explanation:
When looking at indicators of fraud involving inventory overstatement, an important metric to consider is the inventory turnover ratio. A decrease in this ratio could signify that inventory is reported as higher than what is being sold or used, as the ratio measures how often inventory is replaced over a period. If the inventory on books is inflated, the turnover will seem slower, since sales compared to recorded inventory levels will appear lower than they should be. Thus, of the given options, the most likely indicator of fraud involving inventory overstatement is a decrease in the inventory turnover ratio.
Options such as an increase in cost of goods sold or an increase in gross profit margin are ambiguous without additional context and a decrease in sales revenue is not directly indicative of inventory levels being manipulated.