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Which of the following is not a method used to conceal false shipments of inventory?

a. Creating false sales orders
b. Falsely increasing the perpetual inventory
c. Writing off the inventory as scrap
d. Physical padding

1 Answer

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Final answer:

The method not typically used to conceal false shipments of inventory is writing off the inventory as scrap, as it is a legitimate business action for unsellable goods rather than a fraudulent tactic for shipment concealment.

Step-by-step explanation:

To address the question: Which of the following is not a method used to conceal false shipments of inventory? It's important to understand the context in which these methods could be applied. Typically, such methods are associated with fraudulent activity, particularly inventory fraud. Now, let's analyze the options provided.

  • Creating false sales orders: This method involves generating fake orders to make it seem like inventory has been sold when it has not, effectively overstating sales and inventory turnover.
  • Falsely increasing the perpetual inventory: By manipulating accounting records to show more inventory than actually exists, false numbers are reported which do not reflect the physical inventory.
  • Writing off the inventory as scrap: This could be a legitimate business practice if the inventory is actually damaged or obsolete, but it can also be used deceitfully to explain missing inventory that was never there or stolen.
  • Physical padding: This refers to the practice of making inventory seem more substantial than it is, such as by stacking boxes to appear full when they are not, or by filling spaces with non-inventory items to create the illusion of more inventory.

The option that is not typically a method used to conceal false shipments of inventory is writing off the inventory as scrap because this action is usually taken as a last resort to account for inventory that is no longer sellable or usable, and it isn't directly related to concealing shipments.

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