Which Types of Questions Should Be Asked About a Company's

question 33

Multiple Choice

Which types of questions should be asked about a company's relationship with financial institutions?

• A) Is a significant part of the company's income or revenues derived from one or two large transactions?
• B) Has management placed unreasonable demands on the auditor, including unreasonable time constraints?
• C) Has significant "short selling" of the company's stock occurred? If so, for what reasons?
• D) Is the organization highly leveraged through bank or other loans?

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Definitions:

Outstanding Stock

The shares of a company that have been issued and are currently held by investors, including both public and private shareholders.

Effective Control

The practical authority to direct and manage operations, assets, or investments, often regardless of ownership percentages, ensuring the achievement of strategic objectives.

Widely Held Company

A corporation whose ownership is distributed over a large number of people with no single individual or group having a significant proportion.

Stockholders

Owners of shares in a company and thus, hold equity interest, enjoying benefits like dividends and voting rights.