I’ve been thinking a lot about how somebody could commit fraud in retail. In my opinion, accounting fraud in retail is a bad idea. Fraudsters cannot both (A) avoid jail and (B) inflate earnings by a meaningful amount or otherwise significantly mislead investors. Smart fraudsters gravitate towards mining, oil & gas, pharma, etc.
While fraud is a bad idea in retail, some fraudsters are crazy enough to commit fraud even if there is significant risk of jail time. I think some people are biologically wired to steal and cheat even if it doesn’t make sense.
For investors, detecting accounting fraud in a retailer may be extremely difficult. I have not figured out reliable methods of independently verifying a retailer’s numbers.
Advertisements
