(b) Inventory/Cost of Goods Sold Fraud
PharMor is a typical case.
The following illustrates how by overstating inventory, the income of the company will increase.

• Beginning Inventory OK
• Purchases OK
• Goods Available for sale OK
• Ending Inventory HIGH
• Cost of Goods Sold Low
• Income HIGH

Various scenarios of manipulating nventory and or cost of goods sold include the following:

• over-counting physical inventory,
• over-valuation of inventory,
• not writing off obsolete inventory,
• not providing for slow-moving inventory,
• incorrect costing of inventory,
• record fictitious inventory into the books of account,
• under-record purchases,
• record purchases after financial year end closes,
• omission of recording purchases,
• overstating returns to suppliers,
• record returns in an earlier period by ignoring the proper cut-off,
• overstate discounts,
• record very low amount of costs of goods sold,
• omit to records cost of goods sold or reduce inventory