Maple Company has an increase in purchases from specific vendors and an increase in raw materials inventory for the items purchased from these vendors. Sales for the company have not increased and are not forecast to increase. From this information an auditor might suspect
A)an increase in obsolete raw material inventory.
B)theft of raw material inventory.
C)kickbacks from vendors.
D)poor security over raw material inventory.

Question

Quizplus · Accepted Answer

The increase in purchases from specific vendors and the increase in raw materials inventory for items purchased from those vendors could indicate that the company is receiving kickbacks from those vendors. This would be a form of fraud and could be investigated by the auditor. The other options (obsolete inventory, theft, poor security) do not necessarily follow from the given information.

Maple Company Has an Increase in Purchases from Specific Vendors