1. Identify the red flags. 2. Determine what kind of financial statement fraud

1. Identify the red flags. 2. Determine what kind of financial statement fraud the company may be involved in. XYZ Technologies Inc.
Consolidated Balance Sheet (partial) Assets
Unaudited
Dec. 31 2011 Dec. 31 2010
Current assets
Cash and cash equivalents $6181520 $ 970446
Available-for-sale securities 4932763 0
Accounts receivable net of
allowance for doubtful
accounts of $148300 and
$139200 at Dec. 31 2011
and 2010 respectively 12592231 3932170
Inventories 18229317 8609492
Other current assets 18229317 8609492
Total current assets 60165148 22121600 XYZ Technologies Inc.
Consolidated Income Statement (partial)
Year ended December 31
Unaudited 2011 2010 2009
Sales $37847681 $12445015 $8213236
Cost of goods sold 15895741 6832927 4523186
Gross margin 21951940 5612088 3690050