I think it is easy to inflate inventory without auditor detection because inventory are always changing. It's hard to Verify and count a large business inventory who has multiple warehouses around the country each warehouse receive and ship products daily
Does overstated inventory affect just the balance sheet? Explain how it affects the balance sheet and any other financial statements.
Yes over stating inventory affects the balance sheet. Overstating would affect gross profit and net income because not enough of the cost of goods available is being charged to the cost of goods sold. Overstating inventory would also effect current assets, retained earnings