Complete problem 4.55 Horizontal and Vertical Analysis on pages 159 and 160 of the textbook. Study the data in Exhibits 4.55.1 and 4.55.2. Write a memorandum identifying and explaining potential problem areas where misstatements in the current-year financial statements could exist. Be sure to read the additional information given in the problem

Auditing an accounting estimate. Suppose management estimated the market valuation of some obsolete inventory at $99,000; the inventory was recored at $120,000, which resulted in recognizing a loss of $21,000. THe auditors obtained the following information; The invoentory in question could be sold for an amount between $78,000 and $92,000. THE costs of advertising and shipping could range from $5,000 to $7,000.