For many companies, inventory is a significant dollar amount on the company's financial statements. So it's crucial that recorded inventory balances reflect actual values. When such accounts aren't properly stated, the cost of goods sold and current ratios — numbers that often matter to decision makers — may be skewed. If banks discover that your company's inventory accounts are overstated, they may not extend credit. If, when necessary, inventories aren't "written down" (their values lowered in the accounting records), fraud may go undetected or the company's net profits may appear unrealistically rosy.