A discrepancy between the perpetual inventory account and the physical inventory

Question

A discrepancy between the perpetual inventory account and the physical inventory account may indicate the presence of fraud.

Inventory is often the largest single asset reported on the balance sheet of a merchandising business.

The same individual should record inventory transactions and count the inventory to reduce the likelihood of an inventory-related fraud occurrence.

Cost of goods sold is normally the largest single expense on the balance sheet of a merchandising business.

Explanation / Answer

The same individual should record inventory transactions and count the inventory to reduce the likelihood of an inventory-related fraud occurrence is an incorrect statement Different individuals should be given this task.

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