Shipping Bricks In 1989 the U.S. Department of Justice Criminal Division discovered a massive inventory fraud that was being conducted by managers at Miniscribe Corporation. MiniScribe manufactured and sold computer disk drives. The fraud included placing bricks in disk drive boxes, shipping those boxes to customers, and recording a sale when the box was shipped.

MiniScribe managers also knowingly shipped defective drives and recorded sales even though they knew those drives would be returned.

What would be the effect on the income statement and the balance sheet of shipping bricks and recording those shipments as sales? (Hint: Think about the journal entry that would have been made by MiniScribe accountants when a box of bricks was shipped to customers who were expecting disk drives.) Would company officials be able to fool financial statement users for a long time using this type of deception? What could financial statement users have looked for to detect this type of fraud?