Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 Sales $1,000,000 100% $800,000 100% Cost of goods sold 600,000 60% 400,000 50% Gross margin $400,000 40% $400,000 50% Expenses: Selling expenses $150,000 15% $120,000 15% Admin expenses 100,000 10% 88,000 11% $250,000 25% $208,000 26% Income before taxes $150,000 15% $192,000 24% Income taxes 60,000 6% 80,000 10% Net Income 90,000 9% $112,000 14%
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
Sales
$1,000,000
100%
$800,000
100%
Cost of goods sold
600,000
60%
400,000
50%
Gross margin
$400,000
40%
$400,000
50%
Expenses:
Selling expenses
$150,000
15%
$120,000
15%
Admin expenses
100,000
10%
88,000
11%
$250,000
25%
$208,000
26%
Income before taxes
$150,000
15%
$192,000
24%
Income taxes
60,000
6%
80,000
10%
Net Income
90,000
9%
$112,000
14%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started