1. During the financial audit of DIGIT ALL, the Auditor gathered the following relevant financial data on company performance for the past three years. (20 points)

2016

2017

2018

2019

Sales

P220,500.00

P446,250.00

P803,250.00

P1,204,875.00

Cost of Sales

118,125.00

196,875.00

216,562.50

386,564.06

Gross Margin

-

-

-

-

After analyzing above data, the Auditor was convinced that there are fraud indicators.

Required:

A.1

(a) Perform a horizontal analysis (4 points)

(b) Identify potential red flags on possible overstatement of sales. Support your

answer with reason/justification why you consider this (these) as red flags (6 points)

Perform a horizontal analysis (4 points)

A.2

(a) Perform a vertical analysis (4 points)

(b) Identify potential red flags on possible understatement of cost of sales.

Support your answer with reason/justification why you consider this (these) as red flags (6 points)