1. Using the Schedule of Equipment and Leasehold Improvements and the Depreciation Schedule, analyze the reasonableness of the depreciation expense for each fixed-asset category on a yearly basis and explain your findings. Assume fixed assets have a 5-year life and a mid-year purchase date.
2. Based on the conclusions in question 1 regarding equipment, which fraud scheme(s) might cause this activity and what additional procedures might you perform?
3. Based on the conclusions in question 1 regarding leasehold improvements, which fraud scheme(s) might cause this activity and what additional procedures might you perform?

Schedule of Equipment and Leasehold Improvements 20X1 Beginning Balance Ending Balance Additions Retirements Equipment Leasehold Improvements 626,510 143,421 131,440 15,565 16,610 741,340 158,986 769,931 147,005 16,610 900,326 20X2 Beginning Balance Ending Balance Additions Retirements 40,602 Equipment Leasehold Improvements 741,340 158,986 307,790 46,885 1,097,528 205,871 900,326 354,675 40,602 1,303,399 20X3 Beginning Balance Ending Balance Additions Retirements 125,864 Equipment Leasehold Improvements 1,097,528 205,871 6,953,306 135,642 7,924,970 341,513 1,303,399 7,088,948 125,864 8,266,483 Depreciation Schedule 20X1 Beginning Balance Ending Balance Additions Retirements 14,500 Equipment Leasehold Improvements 185,696 24,668 84,325 19,768 255,521 44,436 210,364 104,093 14 299,957 20X2 Beginning Balance Ending Balance Additions Retirements 35,101 Equipment Leasehold Improvements 255,521 44,436 105,718 23,144 326,138 67,580 299,957 128,862 35,101 393,718 20X3 Beginning Balance Ending Balance Additions Retirements Equipment Leasehold Improvements 109,875 326,138 67,580 1,024,587 17,828 1,240,850 85,408 393,718 1,042,415 109,875 1,326,258 Schedule of Equipment and Leasehold Improvements 20X1 Beginning Balance Ending Balance Additions Retirements Equipment Leasehold Improvements 626,510 143,421 131,440 15,565 16,610 741,340 158,986 769,931 147,005 16,610 900,326 20X2 Beginning Balance Ending Balance Additions Retirements 40,602 Equipment Leasehold Improvements 741,340 158,986 307,790 46,885 1,097,528 205,871 900,326 354,675 40,602 1,303,399 20X3 Beginning Balance Ending Balance Additions Retirements 125,864 Equipment Leasehold Improvements 1,097,528 205,871 6,953,306 135,642 7,924,970 341,513 1,303,399 7,088,948 125,864 8,266,483 Depreciation Schedule 20X1 Beginning Balance Ending Balance Additions Retirements 14,500 Equipment Leasehold Improvements 185,696 24,668 84,325 19,768 255,521 44,436 210,364 104,093 14 299,957 20X2 Beginning Balance Ending Balance Additions Retirements 35,101 Equipment Leasehold Improvements 255,521 44,436 105,718 23,144 326,138 67,580 299,957 128,862 35,101 393,718 20X3 Beginning Balance Ending Balance Additions Retirements Equipment Leasehold Improvements 109,875 326,138 67,580 1,024,587 17,828 1,240,850 85,408 393,718 1,042,415 109,875 1,326,258