1. Compute key ratios and other financial measures for crazy eddie during the period 1984-1987. Identify and briefly explain the red flags in crazy eddies financial statement that suggested the firm posed a higher-than-normal level of audit risk.
2. Identify specific audit procedures that might have led to the detection of the following accounting irregularities perpetrated by crazy eddie personnel (a) the falsification of inventory count sheets (b)the bogus debit memos for accounts payable, (c)the recording of transshipping transactions as retail sales and (d) the inclusions of consigned merchandise in year-end inventory.
3. The retail consumer electronics industry was undergoing rapid and dramatic changes during the 1980s. Discuss how changing in an audit clients industry should affect audit planning decisions. Relates this discussion to crazy eddie.
4. Explain what is implied by the term lowballing in an audit context. How can this practice potentially affect the quality of independence audit services?
5. Assume that you were a member of the crazy eddie audit team in 1986. You were assigned to test the clients year-end inventory cutoff procedures. You selected 30 purchase invoices entered in the accounting records near year-end: 15 in the few days prior to the clients fiscal year-end and 15 in the first few days of the new year. Assume that client personnel were unable to locate 10 of these invoices. How should you and your superiors have responded to this situation? Explain.
6. Should companies be allowed to hire individuals who formerly served as their independent auditors? Discuss the pros and cons of this practice.
7. Professional auditing standards identify the management assertions that commonly underlie a set of financial statements. Which of these assertions were relevant to Paragons construction projects? For each of the assertions that you listed describe an audit procedure that Arthur Andersen could have employed to corroborate that assertion.
8. The SEC referred to several audit failures that were allegedly the responsibility of Michael Sullivan. Define what you believe the SEC meant by the phrase audit failure. Do you believe that Sullivan, alone, was responsible for the deficiencies that the SEC noted in Andersens 1997 audit of Golden Bear? Define your answer.
9. Sullivan identified the 1997 Golden Bear audit as high-risk engagement. How does an audit engagement teams responsibility differ, if at all, on a high-risk engagement compared with a normal engagement? Explain.
10. The AICPA has issued several Audit and Accounting Guides for specialized industries. Do auditors have a responsibility to refer to these guides when industries. Do auditors have a responsibility to refer to these guides when auditing clients in those industries? Do these guides override or replace the authoritative guidance included in the professional auditing standards?
11. Were the changes that Paragon made in applying the percentage-of-completion accounting method a change in accounting principle or a change in accounting estimate? Briefly describe the accounting and financial reporting treatment that must be applied to each type of change.

12. I find it important to first learn how to perform accounting and business valuations and then we can better understand how frauds can be identified or forensic analysis performed. (You can't rebuild the engine only ever being taught how to change the oil... )As we learn about the principles and techniques of business valuations consider how can we use these tools for forensic analysis and fraud investigations. You may want to perform some research.