Assume that Aardvark and Zebra compete in the same four-digit SIC code industry and offer comparable products and services. The following table contains their reported financial performance and condition for the last two years, calculated ratios, and key non-financial metrics. Assume that industry ratios were derived from a reputable source. Further, assume that non-financial metrics were derived from reliable public and internal sources. Identification of Red Flags

1) Describe any symptoms of fraud

2) Draw a conclusion about fraud prediction and recommend the next steps.

 

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Balance Sheet Assets-Cash Assets-Accounts Receivable Assets-Long-term Assets Liabilities-Current Liabilities-Long-term Liabilities Stockholders Equity Liabilities and Stockholders Equity Income Statement Revenues Costs of Good Sold Gross Profit Operating Expenses Operating Income Analysis of Statement of Cash Flows Operating Income Depreciation Operating Cash Operating Cash Flows Ratios Current Ratio Debt-to-Assets Ratio Return on Assets Gross Margin Operating Cash Flow/Income DuPont Expression Ratios Risk-Assets-to-Equity Revenue Generation-Asset Turn Profits-Profit Margin Return on Equity Analysis of Nonfinancial Metrics Retail Square footage # Employees # Store locations Aardvark Company Year 1 Year 2 Analysis 375 720 92% Year 1 375 375 795 112% 375 750 1350 80% 750 1,500 2,865 91% 1,500 600 1125 88% 600 1125 300 562.5 88% 300 562.5 900 1,687.5 88% 900 1,687.5 600 1,177.5 96% 600 877-5 1,500 2,865 91% 1,500 2565 1,800 3,600 100% 750 1,387.5 85% 1,050 2,212.5 111% 900 1,635 82% 150 577-5 285% 150 577-5 285% -232.5-720% 37.5 187.5 345 84% Aardvark Company Year 1 Year 2 Industry 0.63 0.64 1.15 0.600 0.589 0.625 10% 20% 10% 58% 61% 125% 60% Zebra, Inc. Year 2 Analysis 720 92% 495 32% 1,350 80% 2,565 71% 1,800 3,300 750 1,387-5 1,050 1,912.5 900 1,635 150 277-5 150 37.5 187.5 85,500 157,500 84% 1710 3112.5 82% 142.5 255 79% 2.50 2.43 2.75 1.20 1.26 1.25 8% 16% 8% 25% 49% 27% Aardvark Company Year 1 Year 2 Analysis Year 1 277-5 67.5 88% 88% 88% 46% 71% 2.50 2.92 1.20 1.29 8% 8% 25% 32% 83% 85% 82% 82% 85% Year 1 0.63 0.64 1.15 0.600 0.658 0.625 10% 11% 10% 58% 58% 58% 58% 125% 125% 124% 125% 85% 80% 345 84% Zebra, Inc. Year 2 Industry 2.75 1.25 8% 27% Zebra, Inc. Year 2 Analysis 85,500 157,500 84% 1710 3112.5 82% 142.5 255 79% Balance Sheet Assets-Cash Assets-Accounts Receivable Assets-Long-term Assets Liabilities-Current Liabilities-Long-term Liabilities Stockholders Equity Liabilities and Stockholders Equity Income Statement Revenues Costs of Good Sold Gross Profit Operating Expenses Operating Income Analysis of Statement of Cash Flows Operating Income Depreciation Operating Cash Operating Cash Flows Ratios Current Ratio Debt-to-Assets Ratio Return on Assets Gross Margin Operating Cash Flow/Income DuPont Expression Ratios Risk-Assets-to-Equity Revenue Generation-Asset Turn Profits-Profit Margin Return on Equity Analysis of Nonfinancial Metrics Retail Square footage # Employees # Store locations Aardvark Company Year 1 Year 2 Analysis 375 720 92% Year 1 375 375 795 112% 375 750 1350 80% 750 1,500 2,865 91% 1,500 600 1125 88% 600 1125 300 562.5 88% 300 562.5 900 1,687.5 88% 900 1,687.5 600 1,177.5 96% 600 877-5 1,500 2,865 91% 1,500 2565 1,800 3,600 100% 750 1,387.5 85% 1,050 2,212.5 111% 900 1,635 82% 150 577-5 285% 150 577-5 285% -232.5-720% 37.5 187.5 345 84% Aardvark Company Year 1 Year 2 Industry 0.63 0.64 1.15 0.600 0.589 0.625 10% 20% 10% 58% 61% 125% 60% Zebra, Inc. Year 2 Analysis 720 92% 495 32% 1,350 80% 2,565 71% 1,800 3,300 750 1,387-5 1,050 1,912.5 900 1,635 150 277-5 150 37.5 187.5 85,500 157,500 84% 1710 3112.5 82% 142.5 255 79% 2.50 2.43 2.75 1.20 1.26 1.25 8% 16% 8% 25% 49% 27% Aardvark Company Year 1 Year 2 Analysis Year 1 277-5 67.5 88% 88% 88% 46% 71% 2.50 2.92 1.20 1.29 8% 8% 25% 32% 83% 85% 82% 82% 85% Year 1 0.63 0.64 1.15 0.600 0.658 0.625 10% 11% 10% 58% 58% 58% 58% 125% 125% 124% 125% 85% 80% 345 84% Zebra, Inc. Year 2 Industry 2.75 1.25 8% 27% Zebra, Inc. Year 2 Analysis 85,500 157,500 84% 1710 3112.5 82% 142.5 255 79%

Answer rating: 100% (QA)

Potential Fraud Symptoms in the Aardvark and Zebra Financial Statements Based on the financial statements provided for Aardvark and Zebra there are se... View the full answer