Chapter 7 walks you through a forensic accounting investigation. The investigation is broken down into 6 distinct phases. Each phase provides instructions on what you are to do for that phase. You are to complete all 6 phases of the investigation for this assignment. Some guidance: Phase 1 a: Identify at least 3 additional pressures/motivations; at least 5 additional opportunities and at least 3 additional rationalizations Phase 1 b: Develop at least 2 additional fraud hypotheses beyond what is presented in the textbook. Phase 2 a: Using the financial statement information presented complete the following: 1. Common sized income statement and balance sheet (vertical analysis) 2. Horizontal analysis (trend analysis) over the 5 years for the income statement and balance sheet 3. Calculate the Gross Margin by year, Net Margin by year, Return on Assets by year, Debt to Assets by year, Current Ratio by year, Inventory turnover by year, Interest coverage by year and Debt to equity by year. 4. Identify items of interest from your financial analysis (significant changes, deviations from expectations, etc.) (for instance, gross margin in 2007 and 2008 is significantly lower) and discuss how those items impact your hypotheses. Phase 2 b: Identify at least 3 journal entries that you would question and explain what about those journal entries you would question. Phase 3: Summarize the relevant facts from each interview and explain how those facts impact your hypotheses. Phase 4: Prepare a schedule of losses, by year, for Mountain State Sporting Goods. Make sure to factor in lost interest as well. Phase 5: Discuss Mr. Hess' obligation to the company and whether you believe that he was negligent in the commission of his duties. Phase 6: Identify the pros and cons of resolving this case through both criminal action and civil action.