I need someone who is really good at auditing. You need to write a one page auditing report and you need to read the instruction CAREFULLY.

INCOME STATEMENTS ($000's) Years ended June 30 Sales revenue Cost of goods sold Gross profit Selling and general expenses Depreciation expense Warranty expense Bad debt expense Legal fees Interest expense Income before taxes Income tax expense Net income Dividends paid 2016 2015 2014 7,750 $ 7,713 $ 7,493 5,545 5,381 5,225 2,205 2,332 2,268 1,671 1,622 1,577 56 55 49 75 65 55 90 85 90 43 14 12 110 127 135 160 364 350 47 109 104 $ 113 $ 255 $ 246 $ $ 125 $ 125 $ 100 The following schedule shows the sales revenue and components of costs of goods sold for each of Divergent's two products. SCHEDULES OF GROSS PROFIT ($000's) Years ended June 30 2016 2015 2014 mp3 Players Sales $ 4,880 $ 4,932 $ 4,791 Cost of goods sold: Materials 1,895 1,835 1,781 Labor 1,103 1,074 1,043 Overhead 689 664 662 Standard cost variances 3 5 (4) Depreciation 70 70 68 3,760 3,648 3,550 Gross Profit $ 1,120 $ 1,284 $ 1,241 Travel alarm clocks Sales Cost of goods sold: Materials Labor Overhead Standard cost variances Depreciation Gross Profit BALANCE SHEETS ($000's) June 30 Cash Accounts receivable Bad debt allowance Inventories: Raw materials (at cost) Finished goods: (at standard) mp3 players Travel alarms Prepaid expenses Current assets Land Building and equipment Accumulated depreciation Total assets Accounts payable Taxes payable Accrued interest Warranty liability Current portion of long-term debt Current liabilities Long-term debt Total liabilities Paid-in-capital Retained earnings Total stockholders'equity Total liabilities and equity $ 2,870 $ 2,781 $ 2,702 $ 888 537 301 (2) 61 1,785 1,085 $ 868 532 276 (3) 60 1,733 1,048 $ 840 505 270 2 58 1,675 1,027 2016 $ $ $ $ 30 $ 795 (70) 2015 2014 165 $ 77 674 658 (60) (60) 322 304 286 863 405 8 2,353 450 1,865 (945) 3,723 $ 738 390 2 2,213 450 1,858 (790) 3,731 $ 710 374 4 2,049 450 1,831 (610) 3,720 787 $ 16 40 100 943 1,300 2,243 550 930 1,480 3,723 $ 675 $ 14 10 40 100 839 1,400 2,239 550 942 1,492 3,731 $ 694 13 11 40 100 858 1,500 2,358 550 812 1,362 3,720 Divergent Company1 It is August 2016 and you are a staff accountant assigned to the 2016 audit of Divergent Company. Divergent Company is a closely held corporation managed by the founder and principal shareholder, Adam B. Clark. Your firm has audited Divergent for the last five years. The audited financial statements for the years ended June 30, 2015 and 2014 are presented below, with the client's unaudited financial statements for 2016. Additional Information: Divergent manufactures and sells mp3 players and travel alarm clocks. All sales are on credit to department stores and electronics wholesaling companies. Credit terms are net 30 days. Divergent offers a one-year warranty covering manufacturing defects. Divergent uses a periodic inventory system and determines its year-end inventory by taking a physical count on June 30. You and your supervisor observed the count on June 30, 2016 and performed numerous test counts, but you have not performed further audit tests regarding inventory. The interest rate on all debt is 8 percent. Annual interest and principal payments are due each June. Required: The engagement audit senior has asked you to perform analytical procedures to identify potential risks and areas of audit focus in Divergent Company's 2016 financial statements. Usually in practice you will be required to review the financial statements and identify all accounts that appear to have unusual balances compared with the prior two years. For this project, assume that your review was limited to the following areas: accounts receivable, inventory, interest expense, and legal expenses. Review these four areas and, for each of the four areas separately, document the following (one page max total, single-spaced): The reasons why you believe the fluctuations are ok or require further investigation. The potential accounting issues or operating problems that might have caused the unexpected fluctuations, if any. Particular aspects of the company's operations that you believe should receive special attention during the 2016 audit. The idea is to bring up relevant points concisely and in good form. Assume that the audit senior on the job wants you to brief her on the risks and why they are risks, but doesn't want a lot of fluff as she is a very busy person. Adapted from \"ABC Electronics: An Instructional Case Illustrating Auditors' Use of Preliminary Analytical Procedures\" developed by Paul M. Clikeman and Jamie Diaz (Current Issues in Auditing, volume 8, issue 1, 2015). 1 Hints: Accounts Receivable: take a look at the days sales outstanding ratio (365/(sales/AR)) Inventory: take a look at the gross profit percentage of sales and the inventory turnover (CGS/Inventory) Interest Expense: Take a look at the accrued interest and the interest-to-debt ratio (interest expense/(LT debt + ST debt)). Legal Expense: no hints for this one - you can do this. Grading: The assignment will be graded 60% on content and 40% on communication/presentation. This project is worth 10 points. Content Comments: Your points shouldn't be as simple as \"Accounts Payable went down by XX%\". Rather, here is an example of how someone might describe an audit issue. "Accounts payable is reported on the balance sheet at $13,288, even though the prior year was $15,072. For a growing company with sales growth of 38% over the previous year, this seems odd. If sales are growing substantially, then one would expect that accounts payable should also be increasing. Further, inventory levels have doubled from 20X7 to 20X8, and have also increased as a percent of total assets. It would be expected that as the company purchases more inventory the accounts payable account would also increase in a similar fashion.\" Communication/Presentation Comments: Write concisely in good and clear English (one page max total, single-spaced). What you write needs to make sense. If you don't understand what you wrote - your audit senior (or grader) won't either! Use the following format for your deliverable (one page max total, single-spaced): [Your name] [Your ASU email address] [Date] Accounts Receivable [Text] Inventory [Text]