The Risk of Fraudulent Financial Reporting Is Greater for Companies

question 3

Multiple Choice

The risk of fraudulent financial reporting is greater for companies:

• A) where greater dispersion of inventories are involved.
• B) where there is an ineffective audit committee.
• C) where significant estimates are involved.
• D) all of the above

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Definitions:

Private Placement

The sale of securities to a relatively small number of select investors as a way of raising capital, bypassing the public markets.

Securities

Financial instruments representing ownership (stocks), a debt agreement (bonds), or the rights to ownership (derivatives) that can be bought and sold.

SEC

The U.S. Securities and Exchange Commission, a federal agency responsible for enforcing federal securities laws and regulating securities industry participants.

Operations

The day-to-day activities carried out by a business to generate earnings, involving production, sales, and service provision.