Please identify five other areas that may require additional audit scrutiny and explain why.
Seuthwest Appliances, Inc. Balance Sheets (Amountain Dollar) 19X0 19X1 19X0 % of Assets 19X1 % of Assets % Change Assets Current Assets Cash and cash equivalents Money market funds Accounts recevable Allowance for doubtful accounts Inventory Total Current Assets 22,845 S 31,510 301,713 (31,916) 307,701 631,053 10,867 16,000 395,755 (33,779) 503,091 891,934 (50.71) (49.22) 31.17 (5.84) (3.16) 30.49 6254 40.79 (9.09) Property and Equipment Plant 500,000 Accumulated depreciation - plant (220,000) Equipment 120,000 Accumulated depreciation - equipme (72,000) Land 50,000 Net Property and Equipment 378,000 Total Assets $ 1,009,053 500,000 (240,000) 120,000 (96,000) 50,000 334,000 $ 1,225,934 49.55 (21.80) 11.89 (7.14) 4.96 37.46 100.00 (33.33) (11.64) 27.24 100.00 21.49 Liabilities and Stockholders' Equity 387,757 31.63 17,436 Current Liabilities Accounts payable Payroll taxes payable Income taxes payable Dividends payable Total Current Liabilities 4.37 0.84 1.42 145,031 8,524 30,235 14,197 197,987 4,125 107236 104.55 (86.36 (77.44 108.36 3.203 412,521 Notes payable Total Long-term Liabilities 90,000 90,000 60,000 60,000 (33.33) (33.33) Stockholders' Equity Capital stock Paid-in capital Retained earnings Toral Stockholders' Equity Total Liabilities and Equity 29.73 9.91 300,000 100,000 321,066 721,066 $ 1,009.053 300,000 100,000 35313 71.46 100.00 51.225.03 100.00 Southwest Appliances, Inc. Income Statements (Amounts in Dallara) 19X1 % of Sales 100.00 (07 Sales Sales discounts Sales returns Bad debt expenses Net Sales 1980 $ 2,736,561 (8,371) (33,809) (27,565 2,666,816 19x0 % of Sales 100.00 (0.31) (1.24) (1.01) 19X1 $ 3,277,873 (9,207) (51,559) (33,078) 3,184,029 % Change 19.78 (9.99) (52.50) (20.00 19.39 Cost of goods sold Gross margin 2,159,042 507,774 2,601,646 582,383 290,400 21,199 16,081 7,140 25,673 6,456 3,650 1,140 Salaries expense Payroll tax expense Fringe benefits Rent Utilities Insurance Supplies expense Postage expense Advertising expense Professional fees Miscellaneous Purchase discounts lost Interest expense Depreciation expense Total operating expenses Operating Income 259,287 18,434 14,357 6,491 21,943 6,149 3,067 974 4,636 11,386 980 42,374 9.215 44,000 443,293 64,481 12.00 15.00 12.01 10.00 17.00 4.99 19.01 17.04 10.01 1.00 25.00 27.00 32.00 5,100 11,500 1,225 53,815 12,164 44,000 499,543 82.840 12.69 28.47 25.00 Interest revenue Income before income taxes 22.864 87,345 28,580 111,420 Income taxes Ner Income 25,114 62,231 sh 73.912 S S Beginning retained earnings Net income Dividends Ending retained earnings 271,728 62.231 12.893 321.066 321,066 73,912 41.565 353.413 5 S Identify five other areas that you believe need additional audit scrutiny and explain why. Document your results in the Preliminary Analytical Procedures section of the SW1 Risk Memo and Materiality Template Word. Link your risks to specific accounts. For example, if you feel that the firm's profitability is declining and that management might have an incentive to be more aggressive, note they could do so by affecting all the income statement accounts. I have included one risk comment as an example
