Fantastic Sky Tours Pty Ltd is a small sightseeing tour company in Sydney that specialises in aerial tours of the New South Wales area. Until recently, the company had not had an accounting department. Routine bookkeeping tasks, such as billing, had been handled by a person who had little formal training in accounting. As the business began to grow, however, the owner recognised the need for more formal accounting procedures. Miranda Jenkins, a CPA, was recently hired as the new management accountant, and she has the authority to hire an assistant. During her rst week on the job, Miranda was given the performance report on the next page. The report was prepared by Robert Smith, the company's manager of Aircraft Operations, who was planning to present it to the owner, David Lowry, the next morning. 'Look at these favourable variances for fuel and so forth,' Robert pointed out as he showed the report to Miranda. 'My operations people are really doing a great job.' Later that day, Miranda looked at the performance report more carefully. She immediately realised that it was improperly prepared and would be misleading to the company's owner. See next page: Performance Report prepared by the manager of Aircraft Operations