To meet year-end goals, Trident Telecom doubled shipments to customers during the month of December and let the customers know that they could return any of the extra products that they did not get sold in January. Trident did not allow for any reserve against these expected returns in the financial statements for the year ending in December. What type of financial statement fraud scheme did Trident use to inflate its financial performance?

Question

Quizplus · Accepted Answer

Channel stuffing involves shipping excess inventory to distributors or customers and recording these shipments as sales to inflate revenue figures, which is what Trident Telecom did by doubling shipments and recognizing these as sales without allowing for returns.

To Meet Year-End Goals, Trident Telecom Doubled Shipments to Customers