For question (a), workings are not necessary nor the excel copy. A brief calculation and the identifying the five accounts would be enough.

For (b), please identify and explain briefly 5 possible fraud schemes.

Q2. Investigating Financial Statement fraud MightyU Limited, a technology company, has developed a digital platform that enables customers to produce their own video advertising materials on-line without having to engage media companies with their high costs. The videos produced could then be uploaded onto any social media platform or even sent to media broadcasters for airing. To use this service, clients of MightyU pay a 12- monthly subscription, which MightyU recognises as revenue on proportional basis, and a further hourly charge based on usage. The technology provided and the pricing model attracted a large customer base that includes small scale manufacturers, service providers and even food and beverage operators. The founders of MightyU now feel that the business has the scale for a listing on the local stock exchange but there is disagreement with the appointed advisor over the valuation of the business. Unfortunately, this disagreement is picked up by the local press who report governance issues at MightyU and allude to questionable accounting practices. As a follow-up, the media company engaged your expert forensic accounting services to investigate the accounting practices at MightyU. You are provided with the following 3-year extracts from the financial statements of MightyU. MightyU 2019 $ 2020 $ 2021 $ Balance Sheet items Current Assets Cash 1,500,000 1,550,000 1,600,000 Accounts Receivable 2,300,000 2,150,000 3,500,000 Prepaid Expenses 1,300,000 1,240,000 1,250,000 Inventory 500,000 520,000 510,000 Non-Current Assets & Intangibles Motor Vehicles 350,000 340,000 360,000 IT & Network Equipment 10,500,000 11,500,000 15,100,000 Buildings 2,590,000 2,590,000 2,590,000 Intellectual Property 10,000,000 10,000,000 15,000,000 Current Liabilities Accounts Payable 450,500 500,000 350,000 Accrued Expenses 80,000 81,000 82,000 Unearned Revenue (advanced subscription) 12,000 13,000 10,200 Loan Payable - short term 60,000 55,000 30,000 Non-Current Liabilities Loan 350,000 320,000 400,000 Profit Statement items Revenue 15,000,000 17,500,000 21,500,500 Gross Profit 3,120,000 2,930,000 2,305,000 Gross Profit Margin 20.8% 16.7% 10.7% Required: a. Perform horizontal analysis on the data in the table above and identify five accounts that you consider to be particularly questionable. Show all workings (you may work in Excel copy the results into your solution document). b. For each of the five accounts you identified in part 'a', explain with discussion what five different fraud schemes could be happening that would explain the result.