Reference no: EM132744633

Auditors doing their annual review of the books of a gold refiner were unable to reconcile the inventory value of the gold carried on the company's balance sheet with the assessed value. In an attempt to show he was trying to solve the problem, the vice president of finance hired forensic investigators to review the inventory. The discovery of a brass bar of exactly the same weight as a gold bar on the inventory list raised a question in the minds of the investigators. An interview with a smelter worker revealed that brass scrap had been melted down, cast into bars, and added to the inventory. There was no record of brass bars on the inventory lists. Forty-five brass bars had been valued at $8 million on the balance sheet. Another $5 million was classified as gold bars "in transit". The fraud had been going on for about five years when discovered. The VP finance and CEO were both charged with fraud, convicted and served terms in prison.

Problem 1: What is the purpose of such a fraud identified in (a) above.

Problem 2: State other ways the fraud identified in (a) above can be made.