James Birch is the principal owner of ABC Company, a medium-sized company that sells office equipment to an office supply company that operates in the Midwest. Recently, James received an anonymous tip that the financial statements of ABC for the most recent year, 20X2, were fraudulent. James has contacted you, a forensic accountant, to perform an analysis of the company as a starting point of an investigation. You have organized the information into the following table:

ABC Company
	Vertical Analysis	Horizontal Analysis
Balance Sheet	Year 20X1	Year 20X2	Change
Elements	Amount	%	Amount	%	Amount	%
Cash	$ 1,035,263		$ 643,258
Accounts receivable (net)	5,738,932		8,532,970
Inventory	9,250,164		8,432,581
Plant and equipment (net)	12,593,298		12,789,315
Total assets	$28,617,657		$30,398,124
Accounts payable	$ 739,582		$ 738,431
Non-current debt	1,075,213		985,234
Common stock	400,000		400,000
Paid-in capital	953,621		953,621
Retained earnings	25,449,241		27,320,838
Total liabilities and equity	$28,617,657		$30,398,124
Net sales	$16,358,172		$20,951,359
Cost of goods sold	9,814,903		9,179,156
Gross profit	6,543,269		11,772,203
Selling expenses	1,938,251		2,539,487
Administrative expenses	2,583,421		3,062,512
Net income	2,021,597		6,170,204

Required

1. Complete the table.
2. What areas, if any, appear to deserve closer examination? Why?
3. For any areas identified in name two procedures that you could perform to determine whether the area is misstated.

Answer rating: 100% (QA)

Answer 1 Completing the Table Vertical Analysis Year 20X2 Balance Sheet Elements Amount 20X2 of Total Assets Cash 643258 212 Accounts Receivable 85329... View the full answer