Common-size financial statements are often used by auditors in a process called analytical procedures or analytical review. Unusual relationships or patterns can be identified because of the percentagesthese would be harder to see if the amounts were just kept as dollars. You will be looking for percentages that seem very unstable over the times periods (the percentages jump around too much).

What are some of the unusual relationships you see? Please identify and discuss at least two unusual relationships. Please attach your common-income statement.

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Net Sales Revenue COGS Expense Gross Margin 1985 Dollar Amount 1,240,524 576,694 663,830 Percent 100% 46% 54% 1986 Dollar Amount 4,845,347 2,050,779 2,794,568 Percent 100% 42% 58% 7/31/86 (3 Months) Dollar Amount Percent 5,395,754 100% 2,976,205 55% 2,419,549 45% General Expenses Joint Venture Income Operating Income 306,016 0 357,814 25% 0% 29% 1,125,541 186,679 1,855,706 23% 4% 38% 622,811 102,066 1,898,804 12% 2% 35% 0% 56,053 Interest Expense Income Taxes - Current Income Taxes - Deferred NET INCOME 5% 0% 26% 43,020 48,027 819,014 945,645 1% 1% 17% 20% 64,097 121,133 817,621 895,953 1% 2% 15% 17% 321,761 EARNINGS PER SHARE 0.04 0.12 0.11