I am attaching the case study that goes with this and my work that I have started on question 1. 1. Review the financial information in the attached Tables 1 and 2. Explain why you may or may not be concerned? Perform a complement of procedures to gather analytical evidence of risk. These procedures should include trends for all assets, liabilities, sales, cost of goods sold, gross margin, and total operating expenses, in addition to select ratio analysis. Though you have a comparative income statement and balance sheet, common size statements and comparisons to industry averages may be useful. Does the quantitative evidence indicate accounts or account groups that have expectantly changed over the past two or three years? Do these initial results justify "specific" further investigation? 2. Given the above discussion, identify factors in this case, if any , that point to the risk of fraudulent financial reporting. Using the format presented below, classify any identified risk based on the Triangle of Fraud categories of Incentives/Pressures, Opportunities, and Attitudes/Rationalizations. See Appendix A for examples of risk factors. Your identified risk factors must be specific to this case.

Tech Tennis-USA Inc. Comparative Income Statements For the Year Ended June 2014 to June 2011 ($ in 000's) Sales Cost of Goods Gross Profit Selling & Admin. Expense Operating Income Before Depreciation Net Operating Income Interest Expense Non-operating Income/Expense Special Items Earnings Before Taxes Taxes Net Income 2014 181.123 93.546 87.577 64.285 23.292 1.388 21.904 3.403 0.214 0.000 18.715 7.761 10.954 2013 128.234 68.916 59.318 42.600 16.718 1.840 14.878 1.584 0.000 0.000 13.294 6.189 7.105 2012 76.144 44.360 31.784 20.105 11.679 1.853 9.826 1.947 0.000 0.000 7.896 3.807 4.089 2011 67.654 39.793 27.861 19.210 8.651 1.304 7.347 3.065 0.135 -2.891 1.526 0.405 1.121 Tech Tennis-USA Inc. Comparative Balance Sheet For the Year Ended June 2014 to June 2011 ($ in 000's) Assets Cash & Equivalents Net Receivables Inventories Prepaid Expenses Other Current Assets Total Current Assets Gross Fixed Assets Accumulated Depreciation Net Plant & Equipment Other Assets Total Assets Liabilities & Owner's Equity Long Term Debt Due in 1 yr. Notes Payable Accounts Payable Taxes Payable Accrued Expenses Total Current Liabilities Long-term Debt Deferred Taxes Total Liabilities Common Stock ($2 par) Additional Paid-in-Capital Retained Earnings Less: Treasury Stock Total Owner's Equity Total Liabilities & Owner's Equity 2014 0.885 51.076 39.135 0.000 3.015 27.884 6.336 21.548 2.481 118.140 2013 0.514 27.801 19.577 0.000 1.449 49.341 19.736 4.948 14.788 1.112 65.241 1.250 0.000 13.288 3.782 4.710 23.030 62.057 1.881 86.968 0.001 8.023 23.395 0.247 31.172 118.140 0.900 0.000 15.072 2.619 5.468 24.059 19.841 1.254 45.154 0.001 8.018 12.315 0.247 20.087 65.241 94.111 2012 0.063 14.402 9.762 0.000 0.708 19.523 3.140 16.383 1.884 43.202 2011 0.036 11.719 6.325 0.000 0.475 18.555 18.486 1.304 17.182 1.776 37.513 0.000 2.707 7.344 1.554 3.127 14.732 14.800 0.685 30.217 0.001 8.010 5.210 0.236 12.985 43.202 1.400 3.732 4.724 1.145 3.091 14.092 19.800 0.118 34.010 0.001 1.473 2.221 0.192 3.503 37.513 24.935 Tech Tennis-USA Inc. Statement of Cash Flows For the Year Ended June 2014 (000's) Cash Flows from Operations Net Income Depreciation Expense Change in Marketable Securities Change in Accounts Receivable Change in Inventory Change in Accounts Payable Change in Accrued Expenses Total Cash Flows from Operations Cash Flows from Investing Change in Gross Fixed Assets Total Cash Flows from Investing Cash Flows from Financing Change in Long-term Debt Change in Common Stock ($2 par) Change in Additional Paid-in-Capital Total Cash Flows from Financing Net Change in Cash Balance 10.95 1.39 -23.28 -19.56 0.00 -1,784.00 -758.00 -45,362.66 -8,148.00 -8,148.00 42,216.00 0.00 5.00 42,221.00 -11,289.66 Tech Tennis-USA Inc. Common Size Income Statements For the Year Ended Dec. 31, 2013 Sales Cost of Goods Gross Profit Depreciation Selling & Admin. Expense Net Operating Income Interest Expense Earnings Before Taxes Taxes Net Income 2014 100.00% 51.65% 48.35% 0.77% 35.49% 12.09% 1.88% 10.33% 4.28% 6.05% 2013 2012 2011 100.00% 100.00% 100.00% 53.74% 58.26% 58.82% 46.26% 41.74% 41.18% 1.43% 2.43% 1.93% 33.22% 26.40% 28.39% 11.60% 12.90% 10.86% 1.24% 2.56% 4.53% 10.37% 10.37% 2.26% 4.83% 5.00% 0.60% 5.54% 5.37% 1.66% Tech Tennis-USA Inc. Common Size Balance Sheets For the Year Ended Dec. 31, 2013 Assets Cash Marketable Securities Accounts Receivable Inventory Total Current Assets Gross Fixed Assets Accumulated Depreciation Net Plant & Equipment Total Assets Liabilities & Owner's Equity Accounts Payable Accrued Expenses Total Current Liabilities Long-term Debt Total Liabilities Common Stock ($2 par) Additional Paid-in-Capital Retained Earnings Total Owner's Equity Total Liab. & Owner's Equity 2014 0.75% 43.23% 33.13% 0.00% 2.55% 23.60% 5.36% 18.24% 100.00% 2013 2012 2011 0.79% 0.15% 0.10% 42.61% 33.34% 31.24% 30.01% 22.60% 16.86% 0.00% 0.00% 0.00% 75.63% 57.72% 49.46% 30.25% 45.19% 49.28% 7.58% 7.27% 3.48% 22.67% 37.92% 45.80% 100.00% 100.00% 100.00% 11.25% 3.99% 19.49% 52.53% 73.61% 0.00% 6.79% 0.21% 26.39% 100.00% 23.10% 17.00% 12.59% 8.38% 7.24% 8.24% 36.88% 34.10% 37.57% 30.41% 34.26% 52.78% 69.21% 69.94% 90.66% 0.00% 0.00% 0.00% 12.29% 18.54% 3.93% 0.38% 0.55% 0.51% 30.79% 30.06% 9.34% 100.00% 100.00% 100.00% Ratio 2014 2013 2012 2011 5 Yr. Avg. Liquidity Ratios Current Ratio Quick Ratio 4.086 2.387 2.051 1.237 1.693 1.030 1.317 0.868 2.287 1.381 0.002 0.008 0.002 0.004 0.009 0.002 0.005 0.005 0.002 0.006 0.004 0.002 0.004 0.006 0.002 Efficieny Ratios Inventory Turnover Fixed Assets Turnover Total Asset Turnover Leverage Ratios Total Debt Ratio Long-term Debt Ratio LTD to Total Capitalization Debt to Equity LTD to Equity Coverage Ratios Times Interest Earned Cash Coverage Ratio Profitability Ratios Gross Profit Margin Operating Profit Margin Net Profit Margin Return on Total Assets Return on Equity Return on Common Equity Du Pont ROE