1. [45 points] What was the impact of the restatement on the financial statements? Your company’s 10-K/A should provide a reconciliation or tabular presentation of the original and restated financial statement amounts. a. Prepare vertical income statement(s) and balance sheet(s) for the years and amounts presented in the originally filed 10-K and for years and amounts presented in the 10-K/A i.e., for all years affected by the restatement. What key accounts did the restatement affect? Use changes in the vertical statement amounts to respond to this question. b. What key categories of ratios were affected by the restatement i.e., liquidity, solvency, profitability, efficiency. For each of the categories affected, choose 1 or 2 key ratios, compute the ratio, and discuss changes in the ratio from pre- to post-restatement. Compute and compare these ratios for each year affected by the restatement. c. Graph net income and cash flows from operations for the years and amounts presented in the original 10-K on the same graph. Did the company originally report positive (net income > cash flows) or negative (net income < cash flows) accruals? What does the pattern of net income relative to cash flows suggest about the company’s earnings quality prior to the restatement? Next, graph net income and cash flows from operations for the years and amounts presented in the 10-K/A. Does the pattern of net income relative to cash flows look any different? Why or why not?

2. [10 points] Based on a review of the financial statements of your company and any articles appearing in the financial press (e.g., Business Week, Wall Street Journal etc.) about your company, is there any reason to believe that the misstatements were perpetrated intentionally to conceal a deteriorating financial condition or to increase the values of managerial bonuses or