ABCDE Technologies, Inc., designs, manufactures, andmarkets an extensive line of PC cards. The company sells its PC cards primarily to original equipment man-ufacturers (OEMs) for industrial and commercialapplications in a market with intense competition. Infact, many OEM companies ran into financial difficulty in 2016 because of fierce competition. The followingtables are part of the company s financial statementsfor 2015 and 2016:

ABCDE TECHNOLOGIES, INC., CONSOLIDATED BALANCE SHEET (PARTIAL) UNAUDITED DECEMBER31, 2016 DECEMBER31, 2015

Assets: Current Assets:Cash and cash equivalents $6,181,520 $ 970,446 Available-for-sales securities 4,932,763 Accounts receiv-able, net of allowance for doubtful accounts of $148,300 and $139,200 at December 31,2016 and 2015,respectively 12,592,231 3,932,170 Inventories 18,229,317 8,609,492 Other current assets18,229,317 8,609,492 Total current assets $60,165,148 $22,121,600

ABCDE TECHNOLOGIES, INC., CONSOLIDATED INCOME STATEMENT (PARTIAL) YEAR ENDED DECEMBER 31 UNAUDITED2016 2015 2014 Sales $37,847,681 $12,445,015 $8,213,236 Cost of goods sold 15,895,741 6,832,927 4,523,186 Gross margin $21,951,940 $5,612,088 $3,690,050 Determine the red flags that exist in these financialstatements. Describe the scenarios that might con-tain these symptoms. 2. Based upon the red flags and scenarios you identi-fied, determine what types of financial statementfraud the company may be involved in. ( Hint: Pay careful attention to cost of goods sold, sales,and allowance for doubtful accounts.)