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Your firm is auditing CCure (CC). CC has been working on developing a new drug called New You which began as a cure for COVID. It has been entirely developed in-house with billions of dollars spent on internal research. No money spent so far is for actual manufacturing or securing intellectual property rights and the drug has not reached a state of approval that meets the definition for capitalization under GAAP. CC is very encouraged by recent testing as being completely safe and completely effective. CC is all-in on the NewYou drug and they have no other drugs or other sources of revenue. Currently, Ruther Mooch Tanwork is suing CC for $1.5 billion alleging NewYou infringes upon certain intellectual property rights held by Ruther. CC asserts that the plaintiff's case against them has no merit. However, rather than letting defense of the lawsuit distract them from research, CC offered and settled the lawsuit for $1.5 million after the balance sheet date but before your audit is complete. CC's investors are becoming very nervous about the massive investment but has been assured by management that the current year sales will provide at least $100 million of net income. However, as mentioned above, the FDA has not yet approved the drug, not even after the end of the year. Also, the debt they have outstanding has no debt reduction requirements until it becomes due December 31, 2025. It does require interest-only payments at a rate of 7%. Management states that there were no new borrowings during the year. CC mentioned that they have acquired, this year, a significant amount of equipment to be used in the manufacture of NewYou. The staff will migrate from research activities into development, and accordingly there have been no significant changes to the number of employees nor their pay. Based on the following trial balance (debits positive, credits in brackets), please perform planning analytics and note the items which peak your attention (audit risk) as an auditor-including anything that you do not see here which you expect. In your answer, please indicate a possible reason for the unexpected fluctuation, or if you know it is an error, state so. Also, please list accounts and activity as appropriate to support your analysis. Finally, in accordance with SAS 99, present any fraud risk factors identified. Prior Year 23,370,002 Dollar Change (23,295,002) 250,000 60,000 1,600,000 (20,000) % Change -100% #DIV/0! 400% 8% 0% Current Year Cash 75,000 Inventory 250,000 Prepaid insurance 75,000 Fixed assets 21,600,000 Accumulated deprec. (15,020,000) Reasearch & development asset 325,000,000 Accounts payable (210,000) Debt (None is current) (379,000,000) Common Stock (1,000,000) Ret. Earn. (Accum. Deficit) BOY 124,964,998 Revenue (178,270,100) COS 1,250,000 Selling expenses 1,500,000 General & administrative 18,000,000 Interest expense 57,000,000 Insurance expense 500,000 Depreciation expense 20,000 (23,265,102) OTHER RELEVANT INFORMATION: Purchase of fixed assets (1,600,000) Sale of fixed assets none 15,000 20,000,000 (15,000,000) 228,000,000 (350,000) (380,000,000) (1,000,000) 40,814,998 140,000 1,000,000 84,150,000 (178,270,100) 1,250,000 1,500,000 (7,000,000) 40% 0% 0% 206% #DIV/0! #DIV/0! #DIV/0! -28% 25,000,000 57,000,000 1,500,000 650,000 (1,000,000) (630,000) -67% -97% none Borrowings/ repayments of debt Non-cash investing & financing none Your firm is auditing CCure (CC). CC has been working on developing a new drug called New You which began as a cure for COVID. It has been entirely developed in-house with billions of dollars spent on internal research. No money spent so far is for actual manufacturing or securing intellectual property rights and the drug has not reached a state of approval that meets the definition for capitalization under GAAP. CC is very encouraged by recent testing as being completely safe and completely effective. CC is all-in on the NewYou drug and they have no other drugs or other sources of revenue. Currently, Ruther Mooch Tanwork is suing CC for $1.5 billion alleging NewYou infringes upon certain intellectual property rights held by Ruther. CC asserts that the plaintiff's case against them has no merit. However, rather than letting defense of the lawsuit distract them from research, CC offered and settled the lawsuit for $1.5 million after the balance sheet date but before your audit is complete. CC's investors are becoming very nervous about the massive investment but has been assured by management that the current year sales will provide at least $100 million of net income. However, as mentioned above, the FDA has not yet approved the drug, not even after the end of the year. Also, the debt they have outstanding has no debt reduction requirements until it becomes due December 31, 2025. It does require interest-only payments at a rate of 7%. Management states that there were no new borrowings during the year. CC mentioned that they have acquired, this year, a significant amount of equipment to be used in the manufacture of NewYou. The staff will migrate from research activities into development, and accordingly there have been no significant changes to the number of employees nor their pay. Based on the following trial balance (debits positive, credits in brackets), please perform planning analytics and note the items which peak your attention (audit risk) as an auditor-including anything that you do not see here which you expect. In your answer, please indicate a possible reason for the unexpected fluctuation, or if you know it is an error, state so. Also, please list accounts and activity as appropriate to support your analysis. Finally, in accordance with SAS 99, present any fraud risk factors identified. Prior Year 23,370,002 Dollar Change (23,295,002) 250,000 60,000 1,600,000 (20,000) % Change -100% #DIV/0! 400% 8% 0% Current Year Cash 75,000 Inventory 250,000 Prepaid insurance 75,000 Fixed assets 21,600,000 Accumulated deprec. (15,020,000) Reasearch & development asset 325,000,000 Accounts payable (210,000) Debt (None is current) (379,000,000) Common Stock (1,000,000) Ret. Earn. (Accum. Deficit) BOY 124,964,998 Revenue (178,270,100) COS 1,250,000 Selling expenses 1,500,000 General & administrative 18,000,000 Interest expense 57,000,000 Insurance expense 500,000 Depreciation expense 20,000 (23,265,102) OTHER RELEVANT INFORMATION: Purchase of fixed assets (1,600,000) Sale of fixed assets none 15,000 20,000,000 (15,000,000) 228,000,000 (350,000) (380,000,000) (1,000,000) 40,814,998 140,000 1,000,000 84,150,000 (178,270,100) 1,250,000 1,500,000 (7,000,000) 40% 0% 0% 206% #DIV/0! #DIV/0! #DIV/0! -28% 25,000,000 57,000,000 1,500,000 650,000 (1,000,000) (630,000) -67% -97% none Borrowings/ repayments of debt Non-cash investing & financing none

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