2.Income Statement Analysis
Is there potential for misstated revenues?
Is there potential for misstated expenses?
Analysis of revenue recognition, potential for returns, recalls
Analysis of expenses, % of sales, depreciation/amortization/deferral assumptions
Analysis of “non-recurring” and cut-from-pro-forma expenses
3.Balance Sheet Analysis
This neglected financial statement doesn’t get the press as much.
Are there any overstated assets?
Are there any understated liabilities?
Receivables (relative to sales, allowance, trends)
Inventory (relative to sales, gross margins, methods, trends)
Long term assets
4.Proposed Adjustments if any (show in an exhibit the calculations for the adjustments.)