QUESTION: Paraphrase this article into your ownwords.

Article: Ghost Goods: How to Spot Phantom Inventory byJOSEPH T. WELLS

In this article “Ghost Goods: How to Spot Phantom Inventory” byJOSEPH T. WELLS examines
the inventory’s manipulations. The valuation of inventory involvestwo separate elements:
quantity and price. Determining the quantity of inventory on handis often difficult. Goods are
constantly being bought and sold, transferred among locations andadded during a manufacturing
process. Figuring the unit cost of inventory can be problematic,too; FIFO, LIFO, average cost
and other valuation methods can routinely make a materialdifference in what the final inventory
is worth. As a result, the complex inventory account is anattractive target for fraud.
The obvious way to increase inventory asset value is to createvarious records for items that do
not exist: unsupported journal entries, inflated inventory countsheets, bogus shipping and
receiving reports and fake purchase orders. Since it can bedifficult for the auditor to spot such
phony documents, he or she normally uses other means tosubstantiate the existence and value of
inventory.
Observation of physical inventory. The most reliable way tovalidate inventory quantity is to
count it in its entirety.
Analytical procedures. Ghost goods throw a company’s books out ofkilter. Compared with
previous periods, the cost of sales will be too low; inventory andprofits will be too.