Unsold items at the year-end constitute an entity’s ‘stock’ or ‘inventory’; having been paid for, they must appear in financial statements as an asset, shown at cost, or market value if lower. Any overvaluation will have the effect of inflating profits and assets, and it is therefore crucial that the year-end stocktaking is scrupulously planned, overseen and conducted. I well recall the regimentation of ‘counts’ I was obliged to observe as a young auditor.

However, at fashion retailer Ted Baker something went seriously awry. It has now disclosed that the previously reported £25m overstatement of its January 2019 inventories should actually have been more than double that figure at £58m – that’s not the inventory itself, note; it’s the overstatement!

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