Put yourself in the shoes of a new controller of a company who discovers that the inventory on the books is overstated by a material amount. While you want the inventory balance to be correctly stated, you do not want that magnitude of an adjustment across several years. You decide that your optimal strategy would be to charge a small proportion of the overstatement against income, and thus prevent discovery of the misstatement. The alternative would seem to be bleak, particularly since this is your first year as controller.

Required:

a. As controller, how would you proceed to implement your “‘strategy’”?

b. What problems do you anticipate in implementing your “‘strategy’”?

c. Now put yourself in the shoes of an internal auditor. How could you uncover the misstated books and the attempted coverup?