Answer the following questions based on the following financial information taken from the trial balance for New Day, Inc:

Year 2 Year 1

Account title Debit (Credit) Debit(Credit)

Cash 281,000 297,000

Accounts receivable 12,000 14,000

Prepaid expenses 2,000 8,000

Inventory 581,000 321,000

PPE 926,000 926,000

Accumulated Deprn (581,000) (581,000)

Patents 19,000 19,000

Accounts Payable (11,000) (17,000)

Interest Payable (3,000) (4,000)

Bonds Payable (750,000) (750,000)

Common Stock (50,000) (50,000)

Retained Earnings (426,000) (183,000)

1. Select the two account categories that you feel are the most significant for your audit of year 2 and indicate why you chose them.
2. Identify the auditors objectives for the account categories you selected.
3. For each of the two categories, discuss the internal control issues the auditor should consider.
4. Provide at least 5 substantive test the auditor would likely want to perform in your audit and indicate which auditors objective the test would help satisfy.
5. Is this company financed with debt equity or capital equity? Give some audit procedures relevant an audit of this category.