2. Perform the following Ratios for the company from 20X2 to 20X6 (See Appendix 2, Table 3). Input your formulas in Table 3 in Excel Spreadsheet (16 pts.). Comment on your findings particularly with respect to any anomalies (10 pts.).

A. Gross Margin

B. Net Profit Margin

C. Asset Turnover

D. Accounts Receivable Turnover

E. Working capital

F. Current Ratio

G. Quick Ratio

H. Debt Ratio (Debt to Asset)

Bb Upload Assignment: F Bb 5985548 DE CASE Instructions-Frau x 5985547 X My Home C Get Homework Help + o File C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf Not syncing = Contents 1 of 7 a + (L Page view A Read aloud IV Draw Highlight Erase A A 19 Financial Statement Fraud Investigation There have been complaints that the Best Services Corporation (hereafter referred to as the company) may have manipulated and misrepresented its financial data. You have been hired as a fraud examiner to identify anomalies and detect possible fraud occurring in the company. Your firm has provided you some structure with respect to the analysis you are to perform. The company is a service company and became publicly-traded in 20X2. The attached data are excerpted from the company's 10K filings with the SEC (Securities and Exchange Commission). The company's financial data from the 10K filings with the SEC (Securities and Exchange Commission) are shown in Appendix 1. Data and Templates are provided in Appendix 2. You are required to download Excel Spreadsheets (see Supplementary Material File that contains Appendicesi & 2). After reviewing the primary financial data, your firm has asked you to carry out analytical procedures as noted in the Case Assignment Requirements. CASE ASSIGNMENT REQUIREMENTS 1. Perform vertical (within the year) and horizontal analysis (year-to-year changes) of both the income statement (See Appendix 2, Table 1) and the balance sheet (See Appendix 2 Table 2) for the Company. Input your formulas in the provided Tables using Excel Spreadsheets (16pts.). Based on your analysis, what account(s) appear unusual? What fraud scheme(s) might cause this activity? (10 pts.) 2. Perform the following Ratios for the company from 20x2 to 20x6 (See Appendix 2, Table 3). Input your formulas in Table 3 in Excel Spreadsheet (16 pts.). Comment on your findings particularly with respect to any anomalies (10 pts.). A. Gross Margin B. Net Profit Margin c. Asset Turnover D. Accounts Receivable Turnover E Working capital F Current Ratio G. Quick Ratio H. Debt Ratio (Debt to Asset) 3. Perform Beneish M-Score ratios (See Appendix 2, Table 4). Input your formulas in the provided Excel Spreadsheet (24 pts.). Based on the M-Score results, indicate in which year(s) fraud might have occurred (4 pts.). 4. Based on your ratio and M-score results indicate in which year(s) fraud might have occurred, and provide explanations to support your conclusion(s) (5 pts). 5. Based on your findings, what follow-on step(s) would you recommend for further analysis/investigation (10 pts)? 6. Submission package is complete and professional (5 pts.) Type here to search O la 4 10:21 PM 4/13/2021 Bb Upload Assignment: Fix Bb 5985548 PDE CASE Instructions-Frau x Bb 5985547 X My Home X C Get Homework Help VX + o File | C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf @ Not syncing = Contents 2 of 7 Q + (D Page view | A Read aloud | Draw Highlight Erase 0 A Appendix 1: Statements of Income 20X1 1,408,997 1.132.148 276,849 799,486 3,317,128 20X2 1.903.788 1,318,603 585,185 1,001,529 3,257,546 20X3 3,398,777 2,727,424 671.353 1.049,381 3.804.200 20X4 6,262,582 3.874.442 2.388,140 1,900,984 6,467,306 316,941 8,685,231 (6,297,091) 20X5 11,613,037 4,312,779 7,300,258 2,492,172 7,537,444 214,287 10,243,903 (2,943,645) Net sales Cost of sales Gross profit Selling & Marketing General & Admin expenses R&D Total operating expenses Operating income (loss) Other income (expense) Interest Income Interest expense Other Write-off accrued license fees Write-off Notes Receivable Finance related expense Net income (Loss) 20X6 12,250,073 3,867.373 8,382,700 1,714,501 7,539,311 196,600 9,450,412 (1,067,712) 4,116,614 (3.839,765) 4,259,075 (3,673,890) 4,853.581 (4,182.228) 67,768 (590,970) 6,712 53,835 (397,674) 21,122 137.253 159,461 57.256 (686,315) (940,410) (2,705,835) (1,320,934) 40,605 30,280 (7,952) 4.523 283,500 (500,000) (1,291,636) (2.286,075) $ (4,407,185) $ (7,547,760) $ (5,600,176) $ (5,961,834) $ (4,356,255) $ (3,996,607) Basic & Diluted EPS (0.04) (0.04) (0.03) (0.04) (1.56) (0.86) Additional Information Depreciation & Amort. Expense 421,542 475.542 571,527 943,473 1,026,805 852,378 Type here to search 0 o 3 W L 10:19 PM 4/13/2021 Bb Upload Assignment: Fix Bb 5985548 PDE CASE Instructions-Frau x Bb 5985547 X My Home C Get Homework Help VX + o X File C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf @ Not syncing = Contents 3 of 7 Q + IL Page view | A Read aloud | V Draw Highlight Erase G A 19 Appendix 1: Balance Sheet 20X2 20X3 20X4 20X5 20X6 1,661,213 269.566 375,966 1,186,939 956,710 308,065 610,736 4,432,854 739,013 29,822 796,487 344.729 ASSETS Current assets: Cash and cash equivalents Accounts receivable, net Prepaid expenses & Other assets Notes receivable - related parties Notes receivable Total current assets Property, plant, and equipment, net Security deposits Notes receivable - related parties Other Assets Total Assets 1,522,922 568,811 972,256 37,500 901.728 4,003,217 2.475,080 1.231.474 3,538,219 1,301,468 97,748 9,722 455,458 2,907.172 3,000,651 177.600 5.960.203 2.603,483 405.000 1.576,038 1,941,750 1,877,614 180.646 735.869 7,214,166 1.295,378 7,203,201 275,413 5,670,815 4,947.157 S s S 8,744,332 S 2,032,557 232,169 1,518,739 1,858,486 222,633 2,720,006 1,910,665 2.549,593 153,221 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses Notes payable Notes payable - related party Deferred Revenue Current portion of capital lease Convertible notes payable Total current liabilities Long-term notes payable Convertible notes payable Capital lease - long term Total liabilities Stockholders' equity Capital Stock Retained Earnings (Accum. Deficits) Total stockholders' equity Total liabilities and stockholders' equity 1,177,014 433,942 293,900 211,867 124,459 142,172 10.000 2.393,354 1,222,801 458,452 1,671,819 250,000 100,349 934,594 10,000 4.648,015 225,509 78,387 187,155 58,244 597,933 1,383,440 5.823,082 206,576 2165793 231.358 8,426,809 28,657 46,966 1.474.775 6,163.877 10,129 5.066,667 16,145 202.222 2,595,576 336.158 5.209,682 46.691 5,129,503 6,174,006 20.634,583 (18.283.000) 2.351.583 S 4,947,159 24,694,671 (22.690.187) 2.004.484 7.214,166 S 29.014,339 (30.237.947) (1.223.608) 7,203,201 39,452,952 (35,838,123) 3,614.829 8,744,332 41,296,766 (41.799.957) (503.191) $ 5,670,815 S S j Type here to search 3 w L 10:19 PM 4/13/2021 Bb Upload Assignment: Fi X Bb 5985548 PDE CASE Instructions-Frau x Bb 5985547 X My Home X C Get Homework Help VX + o X Q File C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf @ Not syncing = Contents 4 of 7 a a + ( Page view | A Read aloud Draw Highlight Erase 0 A 19 Find (Ctrl + F) Appendix 2 - Template Table 1: Statements of Income : Horizontal Analysis 20X3 20X4 20X5 Vertical Analysis 20X3 20X4 20X5 20X2 20X6 20X1 20X2 20X6 Net sales Cost of sales Gross profit Selling & Marketing General & Admin expenses R&D Total operating expenses Operating income (loss) Other income (expense) Interest Income Interest expense Other Write-off accrued license fees Write-off Notes Receivable Finance related expense Net income (Loss) Basic & Diluted EPS Additional Information Depreciation & Amort. Expense Note to Students: Perform horizontal (year-to-year changes) analysis. For example: For 20X4 Horizontal Analysis = [(20x4 data - 20x3 data)/20X3 data] Type here to search j o J' 3 W L 10:20 PM 4/13/2021 Bb Upload Assignment: Fix Bb 5985548 DE CASE Instructions-Fraux Bb 5985547 X My Home C Get Homework Help VX + o X File C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf @ Not syncing = Contents 6 of 7 Q + (D Page view | A Read aloud | Draw Highlight Erase A A 19 Appendix 2 - Template Table 3: Ratios 20x2 20x3 20x4 2025 20X6 Formula A. Gross Margin Gross profit/Sales B. Net Profit Margin Net income/Sales C. Asset Turnover Sales/Total Assets (Using Ending Total Assets) D. Accounts Receivable Tumover Sales/Accounts Receivables (Using Ending A/R) E. Working capital Current assets - Current liabilities F. Current Ratio Current assets/Current liabilities GOuick Ratin Cash & Cash Equivalents + ST Investments + A/R/Current Liah H. Debt Ratio (Debt to Assets) Total Liabilities/Total Assets Note: ST -Short-Term 7 Type here to search o e 3 O W L 10:20 PM 4/13/2021 Bb Upload Assignment: Fix Bb 5985548 PDE CASE Instructions-Frau X Bb 5985547 X My Home X C Get Homework Help VX + o X o File C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf @ Not syncing = Contents 7 of 7 Q + ID Page view A Read aloud Draw Highlight Erase A A 19 Appendix 2 - Template Table 4: M-Score Worksheet 20x2 20x3 20X4 20X5 20X6 NA NA NA NA N/A NA NA N/A Receivables/Net Sales (see Note 1) Gross profit/Sales 1-(Current assets +PP&Ey/Total Assets Sales Revenue Depreciation (Depreciation Net PPE) Selling, General & Admin Sales (see Note 2) Total Liabilities/Total Assets TATA Score steps Changes in Current assets Changes in Cash and cash equivalents Changes in Current liabilities Changes in Current portion of Long-Term Debt (See Note 3 & Note 4) Depreciation & Amortization Numerator Total Assets TATA Score M-Score Ratios Formula 1 DSRI [(CY Receivables.CY Net Sales)[(PY Receivables/PY Net Sales) 2 GMI [(PY Gross Margin/PY Sales) [CY Gross Margin/CY Sales)] 3 AQI [1-(CY Current assets +CY PP&E)CY Total Assets]/[1-(PY Current assets + PY PP&EYPY Total Assets) 4 SGI CY Sales/PY Sales 5 DEPI [PY Depreciation (PY Depreciation +PY Net PPE)[CY Depreciation (CY Depreciation+CY Net PPE)] 6 SGAI [(CY SG&A expense CY Sales)} [(PY SG&A expense/PY Sales)) (see Note 2) 7 LVGI [(CY Total Liabilities/CY Total Assets)[(PY Total Liabilities/PY Total Assets) 8 TATA M-Score >-1.78? Input "Yes" or "No">-1.78 Fraud Occurring Based on M-Score? Indicate Yes/No Denote: CY-t; PY-11: Where CY - Current Year and PY- Previous Year NA-Do not need to calculate Note 1: Receivables - Accounts Receivables Note 2: Exclude R&D in the SG&A expense calculation Note 3: Exclude current portion of capital Lease in the Current Portion of Long-Term Debt calculations Note 4: Debt-Notes Payable NA NA NA NA NA N/A NA NA NA NA 8 O j Type here to search 3 O w L 10:20 PM 4/13/2021 Bb Upload Assignment: F Bb 5985548 DE CASE Instructions-Frau x 5985547 X My Home C Get Homework Help + o File C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf Not syncing = Contents 1 of 7 a + (L Page view A Read aloud IV Draw Highlight Erase A A 19 Financial Statement Fraud Investigation There have been complaints that the Best Services Corporation (hereafter referred to as the company) may have manipulated and misrepresented its financial data. You have been hired as a fraud examiner to identify anomalies and detect possible fraud occurring in the company. Your firm has provided you some structure with respect to the analysis you are to perform. The company is a service company and became publicly-traded in 20X2. The attached data are excerpted from the company's 10K filings with the SEC (Securities and Exchange Commission). The company's financial data from the 10K filings with the SEC (Securities and Exchange Commission) are shown in Appendix 1. Data and Templates are provided in Appendix 2. You are required to download Excel Spreadsheets (see Supplementary Material File that contains Appendicesi & 2). After reviewing the primary financial data, your firm has asked you to carry out analytical procedures as noted in the Case Assignment Requirements. CASE ASSIGNMENT REQUIREMENTS 1. Perform vertical (within the year) and horizontal analysis (year-to-year changes) of both the income statement (See Appendix 2, Table 1) and the balance sheet (See Appendix 2 Table 2) for the Company. Input your formulas in the provided Tables using Excel Spreadsheets (16pts.). Based on your analysis, what account(s) appear unusual? What fraud scheme(s) might cause this activity? (10 pts.) 2. Perform the following Ratios for the company from 20x2 to 20x6 (See Appendix 2, Table 3). Input your formulas in Table 3 in Excel Spreadsheet (16 pts.). Comment on your findings particularly with respect to any anomalies (10 pts.). A. Gross Margin B. Net Profit Margin c. Asset Turnover D. Accounts Receivable Turnover E Working capital F Current Ratio G. Quick Ratio H. Debt Ratio (Debt to Asset) 3. Perform Beneish M-Score ratios (See Appendix 2, Table 4). Input your formulas in the provided Excel Spreadsheet (24 pts.). Based on the M-Score results, indicate in which year(s) fraud might have occurred (4 pts.). 4. Based on your ratio and M-score results indicate in which year(s) fraud might have occurred, and provide explanations to support your conclusion(s) (5 pts). 5. Based on your findings, what follow-on step(s) would you recommend for further analysis/investigation (10 pts)? 6. Submission package is complete and professional (5 pts.) Type here to search O la 4 10:21 PM 4/13/2021 Bb Upload Assignment: Fix Bb 5985548 PDE CASE Instructions-Frau x Bb 5985547 X My Home X C Get Homework Help VX + o File | C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf @ Not syncing = Contents 2 of 7 Q + (D Page view | A Read aloud | Draw Highlight Erase 0 A Appendix 1: Statements of Income 20X1 1,408,997 1.132.148 276,849 799,486 3,317,128 20X2 1.903.788 1,318,603 585,185 1,001,529 3,257,546 20X3 3,398,777 2,727,424 671.353 1.049,381 3.804.200 20X4 6,262,582 3.874.442 2.388,140 1,900,984 6,467,306 316,941 8,685,231 (6,297,091) 20X5 11,613,037 4,312,779 7,300,258 2,492,172 7,537,444 214,287 10,243,903 (2,943,645) Net sales Cost of sales Gross profit Selling & Marketing General & Admin expenses R&D Total operating expenses Operating income (loss) Other income (expense) Interest Income Interest expense Other Write-off accrued license fees Write-off Notes Receivable Finance related expense Net income (Loss) 20X6 12,250,073 3,867.373 8,382,700 1,714,501 7,539,311 196,600 9,450,412 (1,067,712) 4,116,614 (3.839,765) 4,259,075 (3,673,890) 4,853.581 (4,182.228) 67,768 (590,970) 6,712 53,835 (397,674) 21,122 137.253 159,461 57.256 (686,315) (940,410) (2,705,835) (1,320,934) 40,605 30,280 (7,952) 4.523 283,500 (500,000) (1,291,636) (2.286,075) $ (4,407,185) $ (7,547,760) $ (5,600,176) $ (5,961,834) $ (4,356,255) $ (3,996,607) Basic & Diluted EPS (0.04) (0.04) (0.03) (0.04) (1.56) (0.86) Additional Information Depreciation & Amort. Expense 421,542 475.542 571,527 943,473 1,026,805 852,378 Type here to search 0 o 3 W L 10:19 PM 4/13/2021 Bb Upload Assignment: Fix Bb 5985548 PDE CASE Instructions-Frau x Bb 5985547 X My Home C Get Homework Help VX + o X File C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf @ Not syncing = Contents 3 of 7 Q + IL Page view | A Read aloud | V Draw Highlight Erase G A 19 Appendix 1: Balance Sheet 20X2 20X3 20X4 20X5 20X6 1,661,213 269.566 375,966 1,186,939 956,710 308,065 610,736 4,432,854 739,013 29,822 796,487 344.729 ASSETS Current assets: Cash and cash equivalents Accounts receivable, net Prepaid expenses & Other assets Notes receivable - related parties Notes receivable Total current assets Property, plant, and equipment, net Security deposits Notes receivable - related parties Other Assets Total Assets 1,522,922 568,811 972,256 37,500 901.728 4,003,217 2.475,080 1.231.474 3,538,219 1,301,468 97,748 9,722 455,458 2,907.172 3,000,651 177.600 5.960.203 2.603,483 405.000 1.576,038 1,941,750 1,877,614 180.646 735.869 7,214,166 1.295,378 7,203,201 275,413 5,670,815 4,947.157 S s S 8,744,332 S 2,032,557 232,169 1,518,739 1,858,486 222,633 2,720,006 1,910,665 2.549,593 153,221 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses Notes payable Notes payable - related party Deferred Revenue Current portion of capital lease Convertible notes payable Total current liabilities Long-term notes payable Convertible notes payable Capital lease - long term Total liabilities Stockholders' equity Capital Stock Retained Earnings (Accum. Deficits) Total stockholders' equity Total liabilities and stockholders' equity 1,177,014 433,942 293,900 211,867 124,459 142,172 10.000 2.393,354 1,222,801 458,452 1,671,819 250,000 100,349 934,594 10,000 4.648,015 225,509 78,387 187,155 58,244 597,933 1,383,440 5.823,082 206,576 2165793 231.358 8,426,809 28,657 46,966 1.474.775 6,163.877 10,129 5.066,667 16,145 202.222 2,595,576 336.158 5.209,682 46.691 5,129,503 6,174,006 20.634,583 (18.283.000) 2.351.583 S 4,947,159 24,694,671 (22.690.187) 2.004.484 7.214,166 S 29.014,339 (30.237.947) (1.223.608) 7,203,201 39,452,952 (35,838,123) 3,614.829 8,744,332 41,296,766 (41.799.957) (503.191) $ 5,670,815 S S j Type here to search 3 w L 10:19 PM 4/13/2021 Bb Upload Assignment: Fi X Bb 5985548 PDE CASE Instructions-Frau x Bb 5985547 X My Home X C Get Homework Help VX + o X Q File C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf @ Not syncing = Contents 4 of 7 a a + ( Page view | A Read aloud Draw Highlight Erase 0 A 19 Find (Ctrl + F) Appendix 2 - Template Table 1: Statements of Income : Horizontal Analysis 20X3 20X4 20X5 Vertical Analysis 20X3 20X4 20X5 20X2 20X6 20X1 20X2 20X6 Net sales Cost of sales Gross profit Selling & Marketing General & Admin expenses R&D Total operating expenses Operating income (loss) Other income (expense) Interest Income Interest expense Other Write-off accrued license fees Write-off Notes Receivable Finance related expense Net income (Loss) Basic & Diluted EPS Additional Information Depreciation & Amort. Expense Note to Students: Perform horizontal (year-to-year changes) analysis. For example: For 20X4 Horizontal Analysis = [(20x4 data - 20x3 data)/20X3 data] Type here to search j o J' 3 W L 10:20 PM 4/13/2021 Bb Upload Assignment: Fix Bb 5985548 DE CASE Instructions-Fraux Bb 5985547 X My Home C Get Homework Help VX + o X File C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf @ Not syncing = Contents 6 of 7 Q + (D Page view | A Read aloud | Draw Highlight Erase A A 19 Appendix 2 - Template Table 3: Ratios 20x2 20x3 20x4 2025 20X6 Formula A. Gross Margin Gross profit/Sales B. Net Profit Margin Net income/Sales C. Asset Turnover Sales/Total Assets (Using Ending Total Assets) D. Accounts Receivable Tumover Sales/Accounts Receivables (Using Ending A/R) E. Working capital Current assets - Current liabilities F. Current Ratio Current assets/Current liabilities GOuick Ratin Cash & Cash Equivalents + ST Investments + A/R/Current Liah H. Debt Ratio (Debt to Assets) Total Liabilities/Total Assets Note: ST -Short-Term 7 Type here to search o e 3 O W L 10:20 PM 4/13/2021 Bb Upload Assignment: Fix Bb 5985548 PDE CASE Instructions-Frau X Bb 5985547 X My Home X C Get Homework Help VX + o X o File C:/Users/scobi/Desktop/CASE%20Instructions-Fraud-Examiner.pdf @ Not syncing = Contents 7 of 7 Q + ID Page view A Read aloud Draw Highlight Erase A A 19 Appendix 2 - Template Table 4: M-Score Worksheet 20x2 20x3 20X4 20X5 20X6 NA NA NA NA N/A NA NA N/A Receivables/Net Sales (see Note 1) Gross profit/Sales 1-(Current assets +PP&Ey/Total Assets Sales Revenue Depreciation (Depreciation Net PPE) Selling, General & Admin Sales (see Note 2) Total Liabilities/Total Assets TATA Score steps Changes in Current assets Changes in Cash and cash equivalents Changes in Current liabilities Changes in Current portion of Long-Term Debt (See Note 3 & Note 4) Depreciation & Amortization Numerator Total Assets TATA Score M-Score Ratios Formula 1 DSRI [(CY Receivables.CY Net Sales)[(PY Receivables/PY Net Sales) 2 GMI [(PY Gross Margin/PY Sales) [CY Gross Margin/CY Sales)] 3 AQI [1-(CY Current assets +CY PP&E)CY Total Assets]/[1-(PY Current assets + PY PP&EYPY Total Assets) 4 SGI CY Sales/PY Sales 5 DEPI [PY Depreciation (PY Depreciation +PY Net PPE)[CY Depreciation (CY Depreciation+CY Net PPE)] 6 SGAI [(CY SG&A expense CY Sales)} [(PY SG&A expense/PY Sales)) (see Note 2) 7 LVGI [(CY Total Liabilities/CY Total Assets)[(PY Total Liabilities/PY Total Assets) 8 TATA M-Score >-1.78? Input "Yes" or "No">-1.78 Fraud Occurring Based on M-Score? Indicate Yes/No Denote: CY-t; PY-11: Where CY - Current Year and PY- Previous Year NA-Do not need to calculate Note 1: Receivables - Accounts Receivables Note 2: Exclude R&D in the SG&A expense calculation Note 3: Exclude current portion of capital Lease in the Current Portion of Long-Term Debt calculations Note 4: Debt-Notes Payable NA NA NA NA NA N/A NA NA NA NA 8 O j Type here to search 3 O w L 10:20 PM 4/13/2021