An Organization Engages in Questionable Financial Reporting Practices Due to Pressure

question 74

Multiple Choice

An organization engages in questionable financial reporting practices due to pressure to meet unrealistic performance targets. Which internal control component is most negatively affected?

• A) Monitoring.
• B) Control activities.
• C) Risk assessment.
• D) Control environment.

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Definitions:

Current Liability

A financial obligation that is due within one year or within the normal operating cycle of the business, whichever is longer.

Indirect Method

A cash flow statement format that starts with net income and adjusts for non-cash transactions and changes in working capital to arrive at net cash provided by operating activities.

Comparative Balance Sheet

A financial statement that compares the balance sheets of two periods, highlighting changes in assets, liabilities, and equity.

Net Income

The total profit of a company after subtracting all its expenses from its revenues.