Question

Which of the following is a common inventory-related fraud scheme?

1) Overstating inventory
2) Understating inventory
3) Misclassifying inventory
4) All of the above

Answer 1

All the options listed, overstating, understating, and misclassifying inventory, are common inventory-related fraud schemes. Each method involves manipulating inventory records to create a false financial impression.

Step-by-step explanation:

The question pertains to common inventory-related fraud schemes within a business context. The correct answer to which of the following is a common inventory-related fraud scheme is 4) All of the above. This includes 1) Overstating inventory to inflate assets and profits, 2) Understating inventory to minimize taxable income or manipulate financial ratios, and 3) Misclassifying inventory, which could be done to obscure actual financial condition or for theft. Each of these acts involves dishonestly manipulating inventory records and financial statements, which can provide misleading information to investors, creditors, and other stakeholders.