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.

Any help would be appreciated, Thanks

Q2. Investigating Financial Statement fraud Mighty 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. 2019 $ 2020 $ 2021 $ 1,500,000 2,300,000 1,300,000 500,000 1,550,000 2,150,000 1,240,000 520,000 1,600,000 3,500,000 1,250,000 510,000 Mightyu Balance Sheet items Current Assets Cash Accounts Receivable Prepaid Expenses Inventory Non-Current Assets & Intangibles Motor Vehicles IT & Network Equipment Buildings Intellectual Property Current Liabilities Accounts Payable Accrued Expenses Unearned Revenue (advanced subscription) Loan Payable - short term Non-Current Liabilities Loan 350,000 10,500,000 2,590,000 10,000,000 340,000 360,000 11,500,000 15,100,000 2,590,000 2.590.000 10,000,000 15,000,000 450,500 80,000 12.000 60,000 500,000 81,000 13,000 55,000 350.000 82,000 10,200 30,000 350,000 320,000 400,000 Profit Statement items Revenue Gross Profit Gross Profit Margin 15,000,000 3,120,000 20.8% 17,500,000 2,930,000 16.7% 21,500,500 2,305,000 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. Q2. Investigating Financial Statement fraud Mighty 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. 2019 $ 2020 $ 2021 $ 1,500,000 2,300,000 1,300,000 500,000 1,550,000 2,150,000 1,240,000 520,000 1,600,000 3,500,000 1,250,000 510,000 Mightyu Balance Sheet items Current Assets Cash Accounts Receivable Prepaid Expenses Inventory Non-Current Assets & Intangibles Motor Vehicles IT & Network Equipment Buildings Intellectual Property Current Liabilities Accounts Payable Accrued Expenses Unearned Revenue (advanced subscription) Loan Payable - short term Non-Current Liabilities Loan 350,000 10,500,000 2,590,000 10,000,000 340,000 360,000 11,500,000 15,100,000 2,590,000 2.590.000 10,000,000 15,000,000 450,500 80,000 12.000 60,000 500,000 81,000 13,000 55,000 350.000 82,000 10,200 30,000 350,000 320,000 400,000 Profit Statement items Revenue Gross Profit Gross Profit Margin 15,000,000 3,120,000 20.8% 17,500,000 2,930,000 16.7% 21,500,500 2,305,000 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