Question 8 of 9 Next QuestionUnsaved change Moving to the next question prevents changes to this answer.

Question 8

Analyze the Balance Sheet below. Complete the following:

What are the red flags identified on the financial statement. Calculate the relevant ratios?

What changes are evident?

What fraud scheme could be present and why?

What are your detection steps to investigate the potential scheme?

2014

2013

Cash

$64,000

8%

$50,000

5%

A/R

96,000

12%

100,000

10%

Inventory

160,000

20%

200,000

20%

Fixed Assets

480,000

60%

650,000

65%

Total Assets

800,000

100%

1,000,000

100%

A/P

$16,000

2%

$70,000

7%

Mortgage

80,000

10%

120,000

12%

Bonds Payable

160,000

20%

200,000

20%

Common Stock

400,000

50%

400,000

40%

Retained Earning

144,000

18%

210,000

21%

Total Liabilities & Equity

800,000

100%

1,000,000

100%