The clicheed can of worms scarcely begins to describe the fiendish mechanisms used by principals at contract board manufacturer Comptronix Inc to inflate sales and profits at least since 1989: the Wall Street Journal has learned that to inflate gross profits, officers at the Guntersville, Alabama company monthly inflated inventory and decreased the cost of […]
The clicheed can of worms scarcely begins to describe the fiendish mechanisms used by principals at contract board manufacturer Comptronix Inc to inflate sales and profits at least since 1989: the Wall Street Journal has learned that to inflate gross profits, officers at the Guntersville, Alabama company monthly inflated inventory and decreased the cost of sales by the same amount, and periodically during the year, some of the phantom inventory was mysteriously transferred to the equipment line in the company’s balance sheet, where a little creative stock-taking perhaps only once a year could give it spurious substance; the inflated inventory had to be sold periodically, and phony accounts receivable were set up; fake invoices were prepared for purchase of the intangible equipment, and the company, which had suppliers to which it also sold equipment, operated a reconciliation account to even out sums owed to and by these customer-suppliers; they wrote cheques themselves made out to equipment suppliers, and these were mysteriously applied by the bank – in an unexplained way – to the reconciliation account – as credits to Comptronix rather than debits.
