Time: About 20 minutes.

Harbor Oak’s reports contain several red flags. Use Exhibits B, C, D, E, and G, which you downloaded in earlier lessons.

1. Follow every expense line on Exhibit B from July to June. Which one rises steadily with no change in enrollment?
2. Compare the March 31 AP aging total (Exhibit G) with Accounts Payable on the March 31 balance sheet (Exhibit D).
3. Look for any negative balance on the March 31 AP aging.
4. Follow Tuition Discounts across the year (Exhibit B) and in the March Budget v. Actual (Exhibit C).
5. For each red flag, write the question you would ask your bookkeeper.