Significant Accounts and Relevant Assertions

Inventory risks center on existence (physical presence), completeness (all items included), cutoff (correct period), valuation (accurate costing), rights (ownership), and presentation (proper disclosure). Cost of goods sold risks involve completeness (all costs captured) and accuracy (correct calculation). Inventory’s dual effect—overstating assets and understating expenses—makes it attractive for manipulation, as seen in frauds like Phar-Mor.