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It is January 2016 and you are a staff accountant assigned to the 2015 audit of SUN Company. SUNCompany is a closely held corporation managed by the founder and principal shareholder, Adam B.Clark.

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It is January 2016 and you are a staff accountant assigned to the 2015 audit of SUN Company. SUNCompany is a closely held corporation managed by the founder and principal shareholder, Adam B.Clark. Your firm has audited SUN Company for the last five years. The audited financial statementsfor the years ended December 31, 2014 and 2013 are presented below, with the client’s unauditedfinancial statements for 2015.Additional Information:SUN Company manufactures and sells mp3 players and travel alarm clocks.All sales are on credit to department stores and electronics wholesaling companies. Creditterms are net 30 days.SUN Company offers a one-year warranty covering manufacturing defects.SUN Company uses a periodic inventory system and determines its year-end inventoryby taking a physical count on December 31. You and your supervisor observed the counton December 31, 2015 and performed numerous test counts, but you have not performedfurther audit tests regarding inventory.The interest rate on all debt is 8 percent. Annual interest and principal payments are dueeach December.Required:The engagement partner has asked you to perform analytical procedures to identify potential risksand areas of audit focus in SUN Company’s 2015 financial statements. Review the financialstatements and identify accounts that appear to have unusual balances compared with the prior twoyears. Prepare a written memorandum documenting:The accounts whose balances appear anomalous and the reasons you identified them assuch.The potential accounting issues or operating problems that might have caused theunexpected fluctuations.Particular aspects of the company’s operations that you believe should receive specialattention during the 2015 audit.Be sure to show your accounting, critical thinking and written communication skills inyour description.

 
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