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During the last year a new competitor, Deflector Inc., entered Intercept’s markets and has offered substantial price reductions, intense marketing and friendly customer service in order to grab market share.  Smith has responded to the competitor’s actions by matching the price cuts and increasing customer service in the hope of maintaining market share.  Smith is very concerned because he cannot see any other areas where costs can be reduced so that the division’s growth and profitability can be maintained.  If profitability is not maintained, her salary and bonus will be reduced.  Smith has decided that one way to make the division more profitable is to manipulate inventory because it represents a large amount of the division’s balance sheet.  She also knows that controls over inventory are week.  She views this inventory manipulation as a short-run solution to the profit decline due to the competitor’s price-cutting.  Smith is certain that once the competitor stops cutting prices or goes bankrupt, the misstatements in inventory can be corrected with little impact on the bottom line. Please note is an individual project and reference any external sources used. Using bullet points evaluate the strengths of New Phone Inc.’s control environment. Using bullet points evaluate the weaknesses of New Phone Inc.’s control environment. What factors in New Phone Inc.’s control environment have led to and facilitated Smith’s manipulation of inventory?

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