Tracy Sellers, a retired musical artist, and his two brothers own a substantial amount of the outstanding common stock of Avery Corporation, a young and fast-growing manufacturer of cartons, containers, and a wide variety of packaging materials. The company's home office is in Cleveland, Ohio, and regional sales offices are operating at several locations across the United States.

Tracy and his brothers, who recently inherited the stock from their aunt, know very little about the business. Just a few days ago, each received the company's 2011 annual report, and Tracy plans to attend the annual shareholders' meeting in Cleveland, scheduled next month. He would also like to take an active part at the meeting—representing both his own and his brothers' interests—especially because doubts about the quality of the company's board of directors and management have recently been raised. However, he knows very little about analyzing annual report information and has hired you to help him prepare for the meeting.

Tracy begins by showing you Avery's 2011 annual report, which includes a letter from Avery's chief executive officer, Arnold Tennenden, a set of consolidated financial statements, and the related footnotes. He cautions you that he wonders whether the CEO's letter accurately characterizes the company's performance and financial position, and he is asking you to ascertain whether this letter reasonably represents Avery's financial situation. Tracy suspects ...

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