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Q1-i Q1-ii ANSWER: For the balance sheet prepare a VERTICAL Analysis (Do not perform this analysis for the Cells colored black, only perform for the cells in yellow). Perform work in the table below.** **PLEASE USE THE EXCEL FUNTIONALITY TO PERFORM THE ANALYSIS. (DO NOT USE A CALCULATOR AND THEN TYPE YOUR ANSWER INTO THE CELLS) Analyze the change in the accounts indicated below in yellow. Think about what could be causing this change? What concerns does this raise for you? Perform your analysis in the yellow cells below. See Accounts Receivable as an example of what an answer should look like. What phase of the audit would this analytic (Vertical Analysis) most likely be performed? (Planning, substantive, completion- Pick 1) Briefly Explan why (1 sentence). |(EX: Substantive- because it would be useful for the auditor to detect a material misstatement as this analytic is very detailed and provides very reliable evidence). Q2-iii ANSWER: 20X8 20X7 % of Assets 20x8 % of Assets 20x7 Change Analysis of Change Assets Current assets Cash and cash equivalents $3,741 $3,019 Accounts receivables 1,119 900 1% 16% Accounts Receivable are a larger percentage of total Assets. This could be indicative of the company giving out credit more -15% loosely, or customers paying back the company more slowly. This could represent a big risk to the audit and would require additional analysis. Hint: consider the change in sales to determine if the change is reasonable. 100 150 Inventory Total current assets 4,960 4,069 Property Plan & Equipment (PP&E), net 711 741 Hint: Unless something significant occurred this % should probably stay the same year over year. 90.000 634 Goodwill Investments Other assets Total assets Liabilities and shareholders' equity Current liabilities Notes payable 0 633 1051 $5,548 175 $96,480 $140 $130 Accounts payable $181 $1,089 Hint: Consider this in relation to the change in inventory- generaly accounts payable are for inventory purchases. Hint: Compare to the Long-term Debt to see if there is any correlation, also consider looking at changes in PP&E. Long Term Debt 2000 0 Total liabilities 2.320 1.219 Shareholders' equity Common stock Retained earnings Total shareholders' equity Total liabilities plus shareholders' equity 91,131 3,029 94,160 $96,480 2,329 2,000 4,329 $5,548

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