A Research On Inventory Audit For The Reveal Of Financial Report Fraud

In recent years, the problem of corporate financial report fraud received worldwide attention. It is not only a tremendous shock to the Western society which used to be proud of its market economy, but also causing great damage to the healthy development of the emerging capital market in China. Among the many financial fraud cases, the inventory has a high frequency of occurrence. As we all know, inventory is a main item of the balance sheet, and also an important part of working capital. Various in kinds and style, and with a high level of liquidity, inventory items can be easily used as a means of conducting financial fraud since they can be evaluated in different ways according to accounting standards.Audit performs as the last line of preventing financial report fraud. It plays an important role in controlling the occurrence and spread of financial report fraud. But as we can see, in many cases of financial fraud, the CPAs have failed to effectively identify and control the risk of inventory fraud, resulting in audit failures. Taking a preliminary thought, the reason can be summarized as the following two. Firstly, inventories are closely related to business processes. Companies who are engaged in financial fraud often fabricate the entire business process, and this kind of fraud in all dimensions makes it difficult for CPAs to detect inventory fraud. Secondly, for different industries, their inventories are greatly different in content and features, and accordingly, inventory fraud are varied, which also makes it difficult for CPAs to accurately take hold of inventory audit risk. All these make inventory items an important while difficult part for CPAs to audit.For these reasons, this paper intends to explore in some depth the issue of practical significance, that is, what steps CPAs should take to successfully audit inventory items so as to reveal financial report fraud, hoping to make some personal advice on how to control the inventory audit risk and ultimately reveal financial report fraud. In the essay, the author points out that CPAs should first identify the risk of inventory fraud from the level of financial statement, and then take appropriate measures to effectively control the risk of inventory audit on the basis of the various characteristics of inventories in different industries.At the end, the essay summarizes several key points that CPAs should pay particular attention to in order to fight against inventory fraud and finally reveal the financial report fraud.