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What are the red flags identified on the financial statement. Calculate the relevant ratios. What...

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Accounting

What are the red flags identified on the financial statement. Calculate the relevant ratios.
What changes are evident?
What fraud scheme could be present and why?
What are your detection steps to investigate the potential scheme?
2014
2013
Sales
$1,000,000
100%
$800,000
100%
Cost of goods sold
600,000
60%
400,000
50%
Gross margin
$400,000
40%
$400,000
50%
Expenses:
Selling expenses
$150,000
15%
$120,000
15%
Admin expenses
100,000
10%
88,000
11%
$250,000
25%
$208,000
26%
Income before taxes
$150,000
15%
$192,000
24%
Income taxes
60,000
6%
80,000
10%
Net Income
90,000
9%
$112,000
14%

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