1. What Red Flags are indicated by the above data?

2. Identify and briefly explain the possible types of Inventory Fraud present.

3. How are these fraud done? How are they concealed?

Tool Co. is medium sized company that buys copper rod and plastic materials to produce insulated copper wiring. Tool Co. operates out of a single building of about 500,000 square feet that includes office space (3%), production area (57%), shipping and receiving (15%), and finished goods and raw materials inventory warehousing (25%). You have gathered the following data about the companys inventories and performance and now you are ready to conduct an analysis of these numbers to discover possible fraud symptoms.

Finished Goods inventory (approx. 300 million ft 2015) Copper rod inventory (approx. 5.9 million lbs 2015) Plastics inventory (approx. 1.1 million lbs 2015) Acccounts payable (for inventory purchases) Days purchases in AP Days sales in receivables Market price of insulated wire (per ft) Market price of copper rod (per lb) Market price of plastics (per lb.) Sales COGS GP Percent of sales COGS GP Avg FG price per foot Avg Copper inventory price per lb Avg Plastic inventory price per l AP turnover (365/Days) Estimated COGS based on TO (AP TO) AP on Actual TO AR (Sales Days) 2015 2014 $1,654,500.00 $1,175,500,000 $2,625,000.00 S1,650,000.00 S224,500.00 S182,000.00 S425,000.00 S450,000.00 43.6 44.2 56.3 48.4 $0.0 $0.0 S0.48 $0.48 $0.19 S0.12 00.00% $8,150,000.00 100.00% S8,450,000.00 73.88% S6,080,000.00 74.60% S6,242,500.00 S2,207,500.00 35.36% $2,070,000.00 34.05% $0.0 2015 2014 $0.44 8.3715596 8.2579186 Dar ys AP $0.20 8.37 8.26 S3,767,201.83 S3,509,615.38 3.87 4.3 $150,088.81 S168,388.43