Which of the Following Characteristics Most Likely Would Heighten an Auditor's

question 623

Multiple Choice

Which of the following characteristics most likely would heighten an auditor's concern about the risk of material misstatement arising from fraudulent financial reporting?

• A) There is a lack of interest by management in maintaining an earnings trend.
• B) Computer hardware is usually sold at a loss before being fully depreciated.
• C) Management had frequent disputes with the auditor on accounting matters.
• D) Monthly bank reconciliations usually include several large checks outstanding.

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Definitions:

Days' Sales

A financial ratio that measures the average number of days it takes a company to convert its receivables into cash.

Payable Outstanding

The total amount of a company's obligations or debts that have not yet been paid to creditors, often referred to as accounts payable.

Joint Cost

Costs that are incurred from producing multiple products at the same time and cannot be separated easily.

Value Basis

The method or approach used to determine the value of an asset, liability, or equity, often for reporting or taxation purposes.