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.

---

Definitions:

Equivalent Payment

A payment or series of payments adjusted to represent a common value under certain specified conditions, often used in comparing different financial plans.

Interest Rate

The percentage of a sum of money charged for its use, often expressed on an annual basis.

Single Payment

A one-time transfer of money to settle a liability or make a purchase.

Payment Obligations

Financial liabilities or commitments that an entity is required to pay to another party.