THIS IS A PROJECT, THE REQUIREMENT IS IN THE ATTACHEMENT.

SUN Company It is January 2016 and you are a staff accountant assigned to the 2015 audit of SUN Company. SUN Company is a closely held corporation managed by the founder and principal shareholder, Adam B. Clark. Your firm has audited SUN Company for the last five years. The audited financial statements for the years ended December 31, 2014 and 2013 are presented below, with the client's unaudited financial statements for 2015. Additional Information: SUN Company 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. SUN Company offers a one-year warranty covering manufacturing defects. SUN Company uses a periodic inventory system and determines its year-end inventory by taking a physical count on December 31. You and your supervisor observed the count on December 31, 2015 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 December. Required: The engagement partner has asked you to perform analytical procedures to identify potential risks and areas of audit focus in SUN Company's 2015 financial statements. Review the financial statements and identify accounts that appear to have unusual balances compared with the prior two years. Prepare a written memorandum documenting: The accounts whose balances appear anomalous and the reasons you identified them as such. The potential accounting issues or operating problems that might have caused the unexpected fluctuations. Particular aspects of the company's operations that you believe should receive special attention during the 2015 audit. Be sure to show your accounting, critical thinking and written communication skills in your description. Grading: The assignment will be graded 70% on content and 30% on communication/presentation. This project will also be evaluated by a panel of professors for purposes of evidence in achieving learning outcome goals by our accreditation body, the AACSB (Association for Advancement of Collegiate Schools of Business). This project is worth 10 points. Content Comments: Include a 2-3 sentence introduction telling the partner what you did and how your findings are structured. 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. Include a brief conclusion. Maybe briefly wrapping up discussion, but for sure telling the partner she should contact you with questions, if she needs additional information, etc. But in your words. Communication/Presentation: Your English should be good. Write concisely and not verbosely (i.e., not wordy). Much of this is probably best presented as bullet points. Your memo should look professional. A couple of pages in memo format is appropriate. The idea is to bring up relevant points concisely and in good form. Assume that the partner 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. INCOME STATEMENTS ($000's) Years ended December 31 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 2015 2014 2013 $ 7,800 $ 7,713 $ 7,493 5,505 5,381 5,225 2,295 2,332 2,268 1,671 1,622 1,577 46 55 49 75 65 55 90 85 90 13 14 12 110 127 135 290 364 350 46 109 104 $ 244 $ 255 $ 246 $ 125 $ 125 $ 100 SCHEDULES OF GROSS PROFIT ($000's) FOR EACH PRODUCT Years ended December 31 2015 2014 2013 mp3 Players Sales $ 5,080 $ 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 50 70 68 3,740 3,648 3,550 Gross Profit $ 1,340 $ 1,284 $ 1,241 Travel alarm clocks Sales Cost of goods sold: Materials Labor Overhead Standard cost variances Depreciation Gross Profit $ 2,720 $ 2,781 $ 2,702 888 868 537 532 301 276 (2) (3) 41 60 1,765 1,733 $ 955 $ 1,048 $ 840 505 270 2 58 1,675 1,027 Note: The overhead standards shown above do not include depreciation. When the finished goods are transferred to inventory, a factor for depreciation is added to the material-labor-overhead standard to determine the inventory carrying cost. BALANCE SHEETS ($000's) December 31 2015 2014 2013 Cash $ 111 $ 165 $ 77 Accounts receivable 795 674 658 Bad debt allowance (70) (60) (60) Inventories: Raw materials (at cost) 322 304 286 Finished goods: (at standard) mp3 players 763 738 710 Travel alarms 475 390 374 Prepaid expenses 8 2 4 Current assets 2,404 2,213 2,049 Land 450 450 450 Building and equipment 1,865 1,858 1,831 Accumulated depreciation (895) (790) (610) Total assets $ 3,824 $ 3,731 $ 3,720 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 $ 757 $ 675 $ 16 14 10 40 40 100 100 913 839 1,300 1,400 2,213 2,239 550 550 1,061 942 1,611 1,492 $ 3,824 $ 3,731 $ 694 13 11 40 100 858 1,500 2,358 550 812 1,362 3,720