Inventory shrinkage rate
Definition
The ratio of inventory loss (the difference between book inventory and physical count) to total inventory, expressed as a percentage. Comparison of shrinkage rates across periods, locations, and product categories is a primary analytical indicator of inventory fraud or systematic theft.
Related terms
- Commission manipulation
- Inflating the value, volume, or classification of sales transactions to generate a larger commission payout. Methods include recording fictitious sales, misclassifying non-commissionable...
- Fictitious inventory write-off
- A journal entry that reduces the recorded inventory balance under a legitimate category (obsolescence, spoilage, shrinkage) without an actual loss of stock....
- Ghost employee
- A fictitious or terminated worker whose record remains active on the payroll master file. Wages are disbursed under that record and diverted...
- Headcount reconciliation
- A detection procedure that cross-references every record on the payroll register against HR personnel files, building access records, and direct management confirmation....
- Timesheet fraud
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Explained in
- Payroll and Inventory Fraud SchemesThe ratio of inventory loss (the difference between book inventory and physical count) to total inventory, expressed as a percentage. Comparison of shrinkage r...