ABCDE Technologies, Inc., designs, manufactures, and markets an extensive line of PC cards. The company sells its PC cards primarily to original equipment manufacturers (OEMs) for industrial and commercial applications in a market with intense competition. In fact, many OEM companies ran into financial difficulty in 2017 because of fierce competition. The following tables are part of the company's financial statements for 2016 and 2017:

1. Determine the red flags that exist in these financial statements. Describe the scenarios that might contain these symptoms.

2. Based upon the red flags and scenarios you identified, determine what types of financial statement fraud the company may be involved in.

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ABCDE TECHNOLOGIES, INC., CONSOLIDATED BALANCE SHEET (PARTIAL)-UNAUDITED DECEMBER DECEMBER 31, 2017 31, 2016 Assets: Current assets: Cash and cash $6,181,520 $970,446 equivalents Available-for- 4,932,763 sales securities Accounts receiv- 12,592,231 3,932,170 able, net of allowance for doubtful accounts of $148,300 and $139,200 at December 31, 2017 and 2016, respectively Inventories 18,229,317 8,609,492 Other current 18,229,317 8,609,492 assets Total current assets $60,165,148 $22,121,600 ABCDE TECHNOLOGIES, INC., CONSOLIDATED INCOME STATEMENT (PARTIAL) YEAR ENDED DECEMBER 31-UNAUDITED 2017 2016 2015 Sales $37,847,681 $12,445,015 $8,213,236 Cost of 15,895,741 6,832,927 4,523,186 goods sold Gross margin $21,951,940 $5,612,088 $3,690,050