Please identify the most important (AT LEAST 5) potential RED FLAGS in the B/S and I/S that the auditor may need to look further into.

21.) For Ballmer Co.'s financial statements, list three potential problems on the financial statements that an auditor should inquire further about. Do not simply list three accounts; provide a one-sentence explanation of why you suspect error or earnings management (20 points). 2019 2018 2017 REVENUE AND EXPENSE: Sales (net) 3,580,000 3,611,000 3,589,000 Cost of goods sold (1,790,000) (2,347,150) (2,332,850) Gross margin 1,790,000 1,263,850 1,256,150 General expense (175,000) (164,000) (166,000) Depreciation (770,000) (450,000) (450,000) Operating income 845,000 649,850 640,150 Interest expense (322,000) (302,000) (300,400) Income taxes (40%) (209,200) (139,140) (135,900) Net income 313,800 208,710 203,850 ASSETS: Cash 338,000 291,000 302,400 Accounts receivable 625,000 517,000 504,000 Allowance doubtful accounts (6,250) (10,340) (10,080) Inventory 418,000 355,000 361,000 Total current assets 1,069,780 1,152,660 1,157,320 Fixed assets 7,283,480 6,455,000 6,455,000 Accum. depreciation (2,580,000) (2,130,000) (1,680,000) Total assets 5,773,260 5,477,660 5,932,320 LIABILITIES AND EQUITY: Accounts payable 124,000 131,000 109,000 Bank loans, 8% 525,000 525,000 505,000 Accrued interest 17,600 15,000 15,400 Total current liabilities 666,600 671,000 629,400 Long-term debt, 10% 2,600,000 2,600,000 2,600,000 Total liabilities 3,266,600 3,271,000 3,229,400 Capital stock 1,317,950 917,950 1,622,920 Retained earnings 1,188,710 1,288,710 1,080,000 Total liabilities and equity 5,773,260 5,477,660 5,932,320 *-During FY2019, Balmer paid $100,000 in cash dividends. *-Balmer bought back stock totaling $704,970 in 2018 and issued stock totaling $400,000 in 2019 *- Debt was outstanding for entire year