Identify at least 4 accounts that you should investigate further in your substantive testing. Explain why you want to investigate these accounts.

There were no dividends paid at any time. The co, is to maintain a current ratio of 2.0, per the bank.

Preliminary Analysis - Comparitive and Common sized Financial statements for 2020 and 2021 $ Common sized $ Common sized Current minus Prior (2021-2020) Particulars 2020 2020 2021 2021 Change in $ Change in % Revenue and Expense (prior year) % (current year) % Sales (net) 2200000 100.00% 1577000 100.00% -623000 Cost of goods sold 1555000 70.68% 999000 63.35% -556000 -7.33% Gross margin 645000 29.32% 578000 36.65% -67000 7.33% General expense 408800 18.58% 401000 25.43% -7800 6.85% Depreciation 60000 2.73% 60000 3.80% 0 1.08% Operating income 176200 8.01% 117000 7.42% -59200 -0.59% Interest expense 10000 0.45% 8000 0.51% -2000 0.05% Income before tax 166200 7.55% 109000 6.91% -57200 -0.64% Income tax 24800 1.13% 43600 2.76% 18800 1.64% Net Income 141400 6.43% 65400 4.15% - 76000 -2.28% 90000 -5.39% 100000 -33200 20000 2000 -0.29% -8000 Assets: Cash Accounts receivable Allowance for doubtful debts Inventory Total Current Assests Fixed Assets Accummulated depreciation Total non current assets Total Assets 56800 120000 -6000 387000 557800 57000 11.08% 12.32% -0.99% 40.64% 63.05% 73.89% -36.95% 36.95% 100.00% 330000 512000 600000 -300000 5.69% 12.03% -0.60% 38.79% 55.90% 80.18% -36.08% 44.10% 100.00% 0.38% -1.86% -7.15% 6.28% 0.87% 7.15% 45800 200000 -60000 140000 185800 800000 -360000 440000 997800 300000 812000 90000 93400 150000 8000 1000 10000 12000 Liabilities and equity: Accounts payable Bank loans, 8% Accrued interest Accruals and other Total current liabilties Long term debt Capital stock retained earnings Total non-current liabilities Total liabilties 11.08% 0.00% 1.23% 1.48% 13.79% 12.32% 49.26% 24.63% 86.21% 100.00% 112000 3400 150000 -2000 -11000 140400 -20000 0 9.36% 15.03% 0.80% 0.10% 25.30% 8.02% 40.09% 26.60% 74.70% 252400 80000 400000 265400 745400 997800 -1.72% 15.03% -0.43% -1.38% 11.50% -4.30% -9.17% 1.97% - 11.50% 100000 400000 200000 700000 812000 65400 45400 100.00% 185800