Appendix A Risk Assessment Case Study A Risk Assessment Case Study Risk Based Auditing – Effective Procedures 111 CASE STUDY – FRAUD RISK EVALUATION Case Study Facts Clearview

Appendix A Risk Assessment Case Study

Risk Based Auditing – Effective Procedures 110

Appendix A: Risk Assessment Case Study

Case Study Facts ................................................................................................................ 111

Sample Prior Year Financial ............................................................................................... 120

Trial Balance, YE 12/31/03 ................................................................................................. 136

Sample Planning Analytics ................................................................................................. 140



CASE STUDY – FRAUD RISK EVALUATION

Case Study Facts

Clearview Manufacturing

Company Background

The Company’s founder David G. (Age 62) started his first window company in the mid-

sixties in Palm Springs, California. Over the years, operating as various entities, the

company has grown to be the largest privately owned new construction window

manufacturer in the state. Today, Clearview boasts sales in excess of $30 million annually.

The Company’s headquarters is still in Palm Springs; however a second manufacturing

location is now maintained in Fresno, California.

Clearview operates as a Sub Chapter S corporation with 100% family ownership as follows:

David G. 40%

David G. Jr. 15%

Wendy G. 15%

Tracy G. 15%

Venetia B. 15%

David G. – The company founder is the driving force behind the success of the company.

As with many entrepreneurs, he is strong-willed with a hot temper. There are only two ways

to do things according to David ―…his way and the wrong way‖. From a political

perspective, he makes Rush Limbaugh look like a liberal. David has been married three or

four times, no one really knows for sure. David’s passion in life is not paying income taxes.

He lives comfortably but is not an extravagant spender.

David G. Jr. – (Age 40), known as ―Jr.‖ around the plant, but strongly dislikes the reference.

He is a USC graduate with a degree in computer science. Since graduating, Jr. has worked

only for his father. He is responsible for all computer systems utilized in the plant and

administrative office. He also generally oversees the manufacturing aspects of the

business. He is married with two children. His wife Lucy also works for the company.



David’s pastime is his boat, which is maintained at Marina Del Rey; however, Dad is not to

know about it, as boats are a ―totally frivolous expenditure.‖

The ―Girls‖, Wendy, Tracy, and Venetia, have all tried at various times to work for the

Company but decided that the amount of ―quality time‖ they were spending with their father

was just more fun than they should be allowed to have. The girls range in age from 26 to

35. At this point they all are maintaining jobs away from the company and do not participate

in the management of the Company.

Product Lines

The Company’s original product line consisted of aluminum windows and doors, which are

still manufactured. In the late 1980’s, stricter energy conservation regulations forced the

Company into developing a new, more energy efficient vinyl window. In recent years, sales

of the more profitable vinyl window make up about 70% of annual sales.

Much of the manufacturing process utilized by Clearview is automated. The components of

the windows consist of extruded aluminum or vinyl rails cut to length during the

manufacturing process. The aluminum, vinyl, and glass used in the manufacturing process

are purchased by the truckload. Like any commodity, the price of these items will fluctuate

based on availability and other economic factors. Much of the success of the company has

come from Sr.’s ability to control these costs and anticipate price increases, building raw

materials inventory when prices were favorable.

The Company contracts with homebuilders throughout California. The Company has made

some sales in Arizona and Nevada to a much lesser extent. Contract sales are recorded as

follows:

50% upon installation of frames

40% upon installation of window panels

10% upon installation of screens

The Company utilizes a ―just-in-time‖ manufacturing process. As the completed windows

and doors come off of the assembly line, they are loaded onto open trailers for shipment to

the job site. For this reason, the Company has little, if any, material work-in-process or

finished goods inventory.



Being a control person, David G. has put a lot of effort into the inventory area. He realizes

that this area he will make or break the profitability of the company. David Sr. approves all

purchase orders, which are matched, with both receivers upon arrival, and vendor invoices

before payment approval. An inventory clerk for both the Fresno and Palm Springs

locations performs this function. Inventory is counted monthly on a rotating basis, whereby

all major items in inventory are counted at least quarterly. In the past several years there

have been no significant discrepancies either on the monthly physical count or on the

annual count with the auditor present.

Independent contractors hired by Clearview install the completed windows and doors.

The Company warranties the window components themselves for a period of two years from

the date of installation. This expense is minor compared to the installation warranty

expense. Throughout Southern California, construction defect claims by homeowner

associations or other homeowner groups have become commonplace. These claims are

not handled directly by the Company. When received, they are turned over to the

Company’s insurance carrier to be handled.

Other Operating Characteristics

The Palm Springs plant building and a large portion of the manufacturing equipment are

owned by David Sr. and leased to Clearview. The Fresno plant is leased directly by the

Company from a third party. Recent additions to property and equipment have been done

directly by Clearview.

All manufacturing plant personnel are union employees. Relations with the union have

always been stable. The Company has never experienced a strike and contracts have been

renewed without substantial negotiations.

A related company, DG Enterprises employs all sales and administrative employees. DG

Enterprises is 100% owned by David, Sr. A management fee in an amount equal to 10% of

Clearview sales is charged. The sales force, for the most part, has been stable.

Occasionally, a key salesman will depart and take key customers with him. On the other

hand, the Company has been successful at hiring competitor’s salesmen away.



Over the years, the sales and growth have fluctuated. As the construction industry goes, so

goes Clearview. In the recession of the early 1990’s, the Company survived and was

profitable but only because of the foresight of David Sr. Many competing window

manufacturers closed up during this period. However, due to the favorable purchasing

contracts that had been entered into and a few other items that were saved for a rainy day,

the company not only survived but also prospered. Now that the construction industry has

seen revitalization, with fewer competitors to bid on contracts, growth has been

phenomenal.

Clearview has tried to acquire window manufacturers unsuccessfully on two separate

occasions. If the opportunity arises, the acquisition of other plants is a possibility.

Accounting System

The accounting system of Clearview is relatively unsophisticated but efficient. The

accounting staff consists of:

Jerry A. – Controller. Jerry has been with the Company approximately five years. This is

the longest tenure of any controller since the inception of the Company and its

predecessors. He is the classic ―hands-on‖ controller responsible for all phases of general

ledger management through to internal financial statements. That, however, is where his

responsibility ends. All matters of corporate finance are left to David G., Sr.

Barbara G. – Credit Manager. Barbara handles all credit functions for the Company. She

monitors accounts receivable and is responsible for all collection activity. All collections

initially pass through Barbara; she does not prepare the deposit or enter payments into the

accounting system. She is, however, responsible for the preparation of credit memos and

other contract receivable adjustments. No other approval is required for the adjustments,

unless over $1,000.



April S. – Accounts Payable Clerk. April receives and processes all incoming invoices for

the Company. All invoices for the Company are paid within 30 days. If discounts are

available, the Company aggressively takes advantage of them. Jerry who prints the check

runs controls access to blank checks. David Sr. signs all checks for the company with

supporting documentation attached. Sr. receives all bank statements unopened and

reviews each check for unusual items. In the late 1980’s, a prior controller had perpetrated

a fraud by setting up a fictitious company and forging checks. As a result of this loss, which

was in excess of $300,000, David maintains tight personal controls on ―his‖ money.

Contract administrators – The Company has approximately eight contract administrators

that monitor progress of the contracts and generate the progress billings. These individuals

are the customers’ link to the Company. They also function as the customer service

department.

The company has throughout its history had audits conducted. At first, they were conducted

because David felt that the way to run a tight business was to always make the employees

feel that someone is watching over them. As the Company grew and its financing needs

changed, lines of credit and other debts were entered into. As the lines of credit grew larger

the bank began to require audits as a condition of the loans. The only current debt that the

Company has is a line of credit disclosed in the financial statements. The line is secured by

inventory and accounts receivable of the Company. In the past, the bank has conducted its

own accounts receivable audits, but has not done so in the last three years. In addition, the

Company is required to submit its monthly unaudited internal financial statements to the

bank.

Prior audits for the Company have been relatively clean. Typical adjustments would consist

of recording depreciation expense as the auditors maintain the fixed asset schedules as an

accounting service. Other adjustments would typically include a tax provision, and a rare

unrecorded payable or accrual.



Summary of Transaction Flow

The Company had developed an integrated accounting system for the recording of

transactions. The system is driven by custom software written for the Company by a third-

party. A summary of the transaction process is as follows:

1. Salesman prepares bid for window and door installation.

2. David Sr. reviews specifications and pricing of all bids.

3. If contract is awarded, it is set up in the Company's IT based sales order and

inventory system.

4. Contract is typically for phase(s) of a tract of homes. The specific combination of

windows and doors for each floor plan is entered.

5. Specifications for each product in the Company's product line have also been

entered into the IT system. These specifications include amounts of all material and

components and standard costs for each.

6. The job is held in backlog until the builder specifies a date range for when the

windows can be installed

7. Utilizing a "pick list", the contract administrator selects an item to be put into

production. This step generates a numbered job order.

8. The items are manufactured and immediately loaded onto trailers for shipment to the

job site.

9. The production department enters into the system that production has been

completed. This generates delivery documentation and installation orders. Both of

these carry the same assigned number as the job order ticket.

10. An invoice is also generated automatically by the system. The contract administrator

reviews the invoice and sends it to the builder for payment.

11. At the completion of a job, estimated costs are removed from inventory, and

recorded as cost of goods sold.



12. At the end of each day, Lucy runs a report that lists delivery ticket, installation

instructions and invoice by job number to monitor that all functions of the integrated

system have been recorded.

13. After installer completes installation, he invoices the Company based on a job

number.

14. April reviews the system to verify that the job being billed by the installer has been

invoiced, and that numbers and types of products installed match the installer's

invoice. If they don't match, the installer is not paid until the discrepancy is resolved.

15. Salesmen are paid their commission from DG Management based on when amounts

are invoiced by Clearview. DG Management accrues based on amounts invoiced.



CLEARVIEW MANUFACTURING INC. MATERIALITY WORKSHEET

12/31/2003 MATERIALITY COMPUTATION If the base amount (larger of total assets or total revenue is: Planning Materiality is:

Over But Not Over Amount + (Percent * Base) $0 50,000.00 0 + 5.5%

$50 thousand 100,000.00 1,250 + 3.0% $100 thousand 500,000.00 2,250 + 2.0% $500 thousand 1,000,000.00 7,500 + 1.0%

$1 million 5,000,000.00 9,500 + 0.8% $5 million 10,000,000.00 19,500 + 0.6%

$10 million 50,000,000.00 40,000 + 0.4% $50 million 100,000,000.00 115,000 + 0.25% $100 million 185,000 + 0.18%

BASE AMOUNT: larger of total revenue or total assets Total Revenue 34,487,823 GP-4/1 1/1 Total Assets 10,248,221 GP-4/1 1/1 Base Amount 34,487,823 PLANNING MATERIALITY CALCULATION:

(Percentage from table * Amount from Table Base Amount) Planning Materiality

40,000 0.4% 177,951

TOLERABLE MISSTATEMENT: Planning materiality from above Factor .75 Tolerable Misstatement 177,951 0.75 133,463 INDIVIDUALLY SIGNIFICANT ITEMS: Any amount up to tolerable misstatement (usually 1/3 or 1/6 of tolerable misstatement) 44,488 =1/3 44,500 22,244 =1/6 22,200





Financial Statements

Clearview Manufacturing, Inc.

December 31, 2002 and 2001 Sample Prior Year Financial



INDEPENDENT AUDITORS' REPORT The Board of Directors Clearview Manufacturing Palm Springs, California We have audited the accompanying balance sheets of Clearview Manufacturing (an S corporation), as of December 31, 2002 and 2001, and the related statements of income, changes in stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Clearview Manufacturing as of December 31, 2002 and 2001, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. February 15, 2003



CLEARVIEW MANUFACTURING BALANCE SHEETS

DECEMBER 31, 2002 AND 2001

ASSETS

2002 2001 CURRENT ASSETS

Cash $000,137,718 $000,002,050 Accounts receivable 3,489,777 2,659,022 Inventories 2,081,938 1,914,338 Other current assets 163,446 130,747

Total current assets 5,872,879 4,706,157

EQUIPMENT AND IMPROVEMENTS

Equipment and tooling 1,175,950 598,536 Vehicles 241,001 211,599

1,416,951 810,135 Less accumulated depreciation 257,227 85,816

Equipment and improvements, net

1,159,724 724,319 OTHER ASSETS

Deposits 154,491 8,724 Receivable from affiliate 38,800 141,686 Receivable from stockholders - 600,000

Total other assets

193,291 750,410

$007,225,894 $006,180,886

The accompanying notes are an integral part of these financial statements.



LIABILITIES AND STOCKHOLDERS’ EQUITY

2002 2001 CURRENT LIABILITIES

Cash overdraft $000,000,00- $000,260,975 Accounts payable 593,424 166,664 Note payable 1,000,000 325,000 Management fee payable 923,000 857,580 Income taxes payable 2,600 - Other current liabilities 326,001 202,891

Total current liabilities 2,845,025 1,813,110

STOCKHOLDERS’ EQUITY Common stock, no par value, 2,000,000 shares

authorized, 500,000 issued and outstanding 2,000,000 2,000,000 Retained earnings 2,380,869 2,367,776

Total stockholders’ equity 4,380,869 4,367,776

$007,225,894 $006,180,886




CLEARVIEW MANUFACTURING STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2002 AND 2001

2002 2001 SALES $025,024,879 $016,428,439 COST OF SALES 18,718,878 11,573,018 6,306,001 4,855,421 EXPENSES

General, administrative, and selling expenses 3,702,566 2,428,260 Interest 52,116 23,385

3,754,682 2,451,645 INCOME BEFORE PROVISION FOR INCOME TAXES 2,551,319 2,403,776 PROVISION FOR INCOME TAXES 38,224 36,000 NET INCOME $002,513,095 $002,367,776




CLEARVIEW MANUFACTURING STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


Common

Stock Retained Earnings Total

Balance, December 31, 2000 $,00,000,00- $000,000,0-) $,000,000,0-) Stock issue 2,000,000 -) 2,000,000) Net income for the year - 2,367,776) 2,367,776) Balance, December 31, 2001 $0,2,000,000 $02,367,776) $04,367,776) Net income for the year - 2,513,093) 2,513,093) Stockholder distributions - (2,500,000) (2,500,000) Balance, December 31, 2002 $,02,000,000 $02,380,869) $04,380,869)




CLEARVIEW MANUFACTURING STATEMENTS OF CASH FLOWS


INCREASE (DECREASE) IN CASH 2002 2001 CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from customers $024,118,820) $013,696,958) Cash paid to suppliers and employees (21,864,559) (14,704,877) Interest paid (52,118) (23,385) Income taxes paid (70,824) (800)

Net cash provided (used) by operating activities 2,131,319) (1,032,104)

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale of assets 8,675) -) Capital expenditures (621,237) (810,135) Note repayment 600,000) -) Loan to affiliate 102,886) (141,686)

Net cash provided (used) by investing activities 90,324) (951,821)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from line of credit 4,525,000) 3,275,000) Repayment of line of credit (3,850,000) (2,950,000) Stockholder distributions (2,500,000) -) Stock purchase -) 1,400,000)

Net cash provided (used) by financing activities (1,825,000) 1,725,000)

Increase (decrease) in cash 396,643) (258,925) Cash at beginning of period (258,925) -) Cash at end of period $000,137,718) $00,(258,925) SCHEDULE OF CASH Cash 137,718) 2,050) Cash overdraft -) (260,975) $000,137,718) $00,(258,925)

Continued The accompanying notes are an integral part of these financial statements.



CLEARVIEW MANUFACTURING STATEMENTS OF CASH FLOWS


(Continued) RECONCILIATION OF NET INCOME TO NET CASH

PROVIDED (USED) BY OPERATING ACTIVITIES: 2002 2001 Net income $002,513,093) $002,367,776) Adjustments to reconcile net income to net

cash provided (used) by operating activities: Depreciation 176,216) 85,816) Bad debt expense 76,245) 72,459) Loss on sale of assets 941) -) (Increase) decrease in assets:

Accounts receivable (907,000) (2,731,481) Inventory (167,600) (1,914,338) Other current assets (32,699) (130,747) Deposits (145,767) (8,724)

Increase (decrease) in liabilities: Accounts payable 426,760) 166,664) Management fee payable 65,420) 857,580) Income taxes payable (32,600) 35,200) Other current liabilities 158,310) 167,691)

Total adjustments (381,774) (3,399,880)

Net cash provided (used) by operating activities $002,131,319) $0,(1,032,104)




CLEARVIEW MANUFACTURING NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Clearview Manufacturing (the Company) was incorporated on July 24, 1996 and began operations in January 1997.

The Company operates manufacturing plants in Palm Springs and Fresno, California. The Company's product line includes aluminum and vinyl windows, doors, and screens. Installation is provided by independent subcontractors. The Company issues credit to customers primarily all of whom are related to the real estate development and construction industries. The Company's sales, although not limited to, are primarily concentrated in the California area. The Company has the ability to file a mechanic's lien against the associated property of a specific contract. The Company routinely files a lien when the outstanding balance exceeds ninety days.

Estimates

The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity allowance of three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method for all inventory components. Work-in-process and finished goods inventories are minor and are included in the raw materials inventories.

Continued




DECEMBER 31, 2002 AND 2001 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Equipment and Improvements

The Company's fixed assets are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets. Maintenance, repairs, and minor renewals are charged to expense as incurred. Replacement and major renewals are capitalized.

Advertising

The Company expenses the costs of advertising the first time the advertising activity takes place.

Revenue and Cost Recognition

The Company records its revenues based upon its estimate of progress on manufacturing and subcontracting installation. Such estimates are calculated on each individual contract based upon manufacturing and installation experience. Manufacturing and installation costs are expensed in the period incurred based upon progress of manufacturing, delivery, and installation.

Income Taxes

The Company has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code by consent of its stockholders. Under those provisions, the Company does not pay Federal corporate income taxes on its taxable income. Instead, the stockholders are liable for individual Federal and California income taxes on the Company's taxable income.

For California franchise tax purposes, an S Corporation excise tax of 1.5% of taxable income is imposed.

NOTE 1: INVENTORIES

Inventories at December 31, 2002 and 2001 consist of the following:

2002 2001 Aluminum $000,463,801 $000,754,412 Glass 624,327 288,091 Vinyl 807,306 688,960 Components 186,504 182,875 $002,081,938 $001,914,338




DECEMBER 31 2002 AND 2001 NOTE 2: EQUIPMENT AND IMPROVEMENTS

Depreciation expense charged to cost of sales and general and administrative expense for the year ended December 31, 2002 and 2001 is as follows:

2002 2001 Cost of sales $000,171,927 $000,073,482 General and administrative 4,289 12,334 $000,176,216 $000,085,816

NOTE 3: NOTE PAYABLE

2002 2001 Line of credit payable to Union Bank, maximum borrowing amount of $4,000,000, expires January 31, 2003, secured by inventory, accounts receivable, and all other tangible and intangible assets payable monthly interest only at index rate (LIBOR) (7.65% as of September 30, 2002). $001,000,000 $000,325,000

NOTE 4: MANAGEMENT FEES PAYABLE

The Company has a cancelable agreement with a related company, D.G. Enterprises for management services. The fee is based on reimbursement of the operating expenses of D.G. Enterprises. Management fees for the period ending December 31. 2002 and 2001 was $2,500,420 and $1,642,580. A management fee payable of $923,000 and $857,580 was remaining at December 31, 2002 and 2001 respectively.





NOTE 5: LEASE COMMITMENTS

The Company leases its Palm Springs manufacturing and office building, and equipment from The David Garwood Family Trust under operating leases expiring December 31, 2007.

The Company also leases a manufacturing facility in Fresno under an operating lease expiring January 2, 2006.

The following is a schedule of future minimum lease payments required under these leases:

Year Ending December 31,

Palm Springs Building

Palm Springs Equipment

Fresno Building Total

2003 $000,540,000 $000,180,000 $000,216,000 $000,936,000 2004 540,000 180,000 216,000 936,000 2005 540,000 180,000 216,000 936,000 2006 540,000 180,000 54,000 774,000 2007 135,000 45,000 - 180,000

Total minimum

future rental payments $002,295,000 $000,765,000 $000,702,000 $003,762,000

Rent expense on all property and equipment for the year ended December 31, 2002 and 2001 was $1,125,022 and $712,463, respectively.

NOTE 6: PROVISION FOR INCOME TAXES

The provision for income taxes for the year ended December 31, 2002 and 2001 represented California franchise tax in the amount of $38,224 and $36,000. The tax is calculated at the statutory rate of 1.5%.





NOTE 7: RELATED PARTY TRANSACTIONS

A substantial amount of the Company's activities are with a stockholder or affiliates of a stockholder. At December 31, 2002 and 2001, amounts receivable/payable to related parties were:

2002 2001 Receivable from affiliate $000,038,800 $000,141,686 Receivable from stockholders - 600,000 Management fee payable 923,000 851,580 The principal transactions with related parties were: Rent $000,734,222 $000,550,463 Management fee 2,500,420 1,642,580

NOTE 8: EMPLOYEE BENEFIT PLAN

The Company maintains a self-insured medical reimbursement plan. The Company is fully liable for employee claims up to $35,000. Claims above $35,000 are covered by a reinsurance contract.



INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION The Board of Directors Clearview Manufacturing Banning, California Our audit of Clearview Manufacturing, as of December 31, 2002 and 2001, was for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying schedules of cost of sales and factory overhead, and general, administrative, and selling expenses are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. February 15, 2003



Schedule 1 CLEARVIEW MANUFACTURING

SCHEDULE OF COST OF SALES AND FACTORY OVERHEAD YEARS ENDED DECEMBER 31, 2002 AND 2001

2002 2001 COST OF SALES

Beginning inventory $001,914,338) $000,000,00-) Purchases – materials 10,023,588) 8,057,139) Sales tax 782,269) 457,521) Contract labor 1,826,621) 1,186,028) Direct labor and related costs 4,097,290) 2,388,215) Factory overhead – schedule below 2,156,710) 1,398,453) Less ending inventory (2,081,938) (1,914,338)

$018,718,878) $011,573,018) FACTORY OVERHEAD )

Building and equipment rent $000,663,894) $000.498,463) Building repairs 52,621) 31,128) Shop supplies 264,839) 154,894) Shop equipment repairs 93,780) 104,949) Small tools and supplies 209,761) 158,296) Utilities 186,638) 110,057) Insurance 146,402) 73,244) Property taxes 78,629) 18,867) Testing and certification 33,115) 15,271) Truck expense 255,104) 159,802) Depreciation 171,927) 73,482)

$002,156,710) $001,398,453)




Schedule 1 CLEARVIEW MANUFACTURING

SCHEDULE OF GENERAL, ADMINISTRATIVE, AND SELLING EXPENSES YEARS ENDED DECEMBER 31, 2002 AND 2001

2002 2001 Advertising $000,005,790 $000,011,851 Auto 35,673 8,382 Bad debts 76,245 2,524 Computer supplies and maintenance 65,453 72,459 Contributions 150 19,394 Depreciation 4,289 10,154 Dues and subscriptions 3,816 12,334 Entertainment 17,016 3,469 Equipment rental 19,422 14,546 Insurance 16,267 7,449 Legal and professional fees 212,162 107,408 Licenses, permits, and fees 14,482 11,030 Management fees 2,502,075 1,642,580 Meals 25,808 23,973 Office rent 270,000 206,406 Office supplies 127,122 73,084 Other general and administrative 36,526 16,927 Property tax 20,899 17,086 Repairs 16,731 7,999 Telephone 76,408 47,547 Travel and lodging 106,369 82,434 Utilities 49,863 29,224 $003,702,566 $002,428,260




Trial Balance, YE 12/31/03









Sample Planning Analytics









Appendix A Risk Assessment Case Study A Risk Assessment Case Study Risk Based Auditing – Effective Procedures 111 CASE STUDY – FRAUD RISK EVALUATION Case Study Facts Clearview

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