Which of the Following Situations Would Raise an Auditor's Concern

question 30

Multiple Choice

Which of the following situations would raise an auditor's concern about the risk of fraudulent financial reporting?

• A)Inability to generate positive cash flows from operations,while reporting large increases in earnings.
• B)Management's lack of interest in increasing the dividend paid on common stock.
• C)Large amounts of liquid assets that are easily convertible into cash.
• D)Inability to borrow necessary capital without obtaining waivers on debt covenants.

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Definitions:

Former Price Comparisons

A method of evaluating the price history of a product or service to assess its current value.

High Price Tags

Items or services being sold at a high cost, indicating either premium quality, brand value, or exclusivity.

Manufacturer's Promotional Allowance

A financial incentive provided by manufacturers to retailers or distributors for promotional activities to increase product sales.

Setting Prices

The process of determining the monetary value at which a product or service will be offered to consumers.