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Harris and the Auditors

Harris and the Auditors - Harris and the Auditors Harris...

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Harris and the Auditors Harris decided that the easiest way to make the Fabricator Division appear more profitable was through manipulating the inventory, which was the largest asset on the books. Harris found that by increasing inventory by 2%, income could be increased by 5%. With the weakness in inventory control, he felt it would be easy to overstate inventory. Employees count the goods using count sheets, and Harris was able to add two fictitious sheets during the physical inventory, even though the auditors were present and were observing inventory. A significant amount of inventory was stored in racks that filled the warehouse. Because of their height and the difficult of counting them, Harris was able to cover an overstatement of inventory in the upper racks. After the count was completed, Harris added four additional count sheets that added $350,000, or 8.6%, to the stated inventory. Harris notified the auditors of the “omission” of sheets and convinced them that they overlooked legitimate inventory.
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