Inventory and Asset Fraud

C

The correct answer to the question is option A: Altered.

Altering inventory and other assets is a relatively common method used by fraudsters to remove assets from the books either before or after they are stolen. This technique involves manipulating the records or physical evidence of inventory and other assets in order to hide the theft or misappropriation.

Fraudsters may alter inventory records to reflect lower quantities or values than what actually exist. By doing so, they can create the appearance of a lower inventory value, which can help conceal the theft. For example, they may decrease the recorded quantities of high-value items or substitute lower-value items in place of stolen ones.

Similarly, fraudsters may alter records related to other assets, such as equipment, machinery, or fixed assets. By manipulating the records, they can make it seem like certain assets have been disposed of or transferred legitimately, when in reality, they have been stolen or misused for personal gain.

This alteration of inventory and other asset records can occur in various ways. It could involve falsifying physical inventory counts, modifying electronic inventory systems, tampering with purchase or sales records, or even manipulating financial statements to hide the theft.

To prevent and detect such fraudulent activities, organizations should implement strong internal controls and procedures. These controls may include segregation of duties, regular physical inventory counts, reconciliation of inventory records with actual counts, and independent reviews of financial records. Additionally, organizations should encourage employees to report any suspicious activities or discrepancies promptly.

Certified Fraud Examiners (CFEs) are professionals who are trained to uncover and investigate fraudulent activities. They play a crucial role in identifying and preventing fraud by utilizing their knowledge of fraud schemes, forensic accounting techniques, and investigative procedures.