You are a manager for an independent auditing firm. Your client, Reclamation and

Renewal, Inc. $($R&R$),$ is a company that performs in$-$ and outpatient rehabilitation

services. Started in $2009$ by entrepreneur Johnny Cleaver, the company grew from

one location to $235$ throughout the continental United States. Four years ago, the

company became publicly traded on the New York Stock Exchange $($NYSE$).$ At that

time, Johnny recruited an impressive group of highly visible board members:

General Lewis Jefferson, former head of Homeland Security; Martha Bluford, retail

businessperson and television personality; Senator Jeffery Morrill of Kentucky;

Pulitzer$-$prize winning author Michelle Preston; and Olympic athlete and tennis

star, Scott Stevens. As a leader, Johnny is a firm believer in written goals and objectives with a keen

emphasis on surpassing Wall Street annual growth expectations, which R&R has

surpassed $12$ percent a year since the company went public. Competition in this

industry has become fierce, as large hospital systems build new modern centers for rehabilitation services. An avid skydiver and skier, Johnny creates large$-$scale

events for his top executives and clients, featuring his favorite sports.

Recently, there has been turnover in the finance accounting office, which you

were told is due to personal family issues. The senior auditor on this engagement

was recently recruited to be the company$$s vice president for finance. You$$ve been

informed the controller of this company works evenings and weekends and never

takes a vacation. You are conducting a risk analysis in preparation for the annual audit. The

interim $($six$-$month financial statements$)$ compared to the past three years are

provided here. Your job is to review the statement and to identify potential areas

that could materially misstate the financial statements. Question $2$ Which financial statement do most users review? Why is the balance sheet critical for practical financial statement analysis?