question1- Analyze Take-Two’s 1998-2000 financial data included in Exhibit 1. Compute the following financial ratios for each of those years: age of accounts receivable, age of inventory, gross profit percentage, profit margin percentage, return on assets, return on equity, current ratio, debt-to-equity ratio, and the quality-of-earnings ratio. What major “red flags,” if any, were present in Take-Two’s financial statements given these ratios? Explain.

question2- Identify the primary audit objectives that auditors hope to accomplish by confirming a client’s year-end accounts receivable. Explain the difference between “positive” and “negative” confirmation requests and discuss the quality of audit evidence yielded by each.

question3- Identify audit tests that may be used as alternative audit procedures when a response is not received for a positive confirmation request. Compare and contrast the quality of audit evidence yielded by these procedures with that produced by audit confirmation procedures.

question4- In your opinion, did the apparent mistakes made by the PwC auditors in auditing Take-Two’s receivables and reserve for sales returns involve “negligence” on their part? Would you characterize the mistakes or errors as “reckless” or “fraudulent”? Justify your answers.

question5- Is it appropriate for audit firms to sharply discount their professional fees for developmental stage companies? Why or why not? What problems, if any, may this practice pose for audit firms?

question6- Do you believe that the relationship between Robert Fish and Ryan Brant was inappropriate? Explain.

question7- Should audit firms accept “ethically challenged” companies and organizations as audit clients? Defend your answer.

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