Determine from the Following the Factor That Would Most Likely

question 72

Multiple Choice

Determine from the following the factor that would most likely elevate the auditor's concern about the risk of financial statement fraud.

• A)Company cannot borrow debt capital without restrictive covenants.
• B)Company finds it difficult to sell equity capital for expansion.
• C)Company has a significant portion of liquid assets on its balance sheet.
• D)Company reports substantial net income but ever decreasing cash flow from operations.

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Definitions:

Majority Vote

A decision rule in which the option that receives more than half of the votes is chosen.

Economic Efficiency

A state where resources are allocated in the most effective way possible, maximizing output without wasting any inputs, ensuring that goods and services are produced at the lowest possible cost and distributed to those who value them most.

Deregulation

The process of removing or reducing government controls and restrictions in an industry to allow for more competition and efficiency.

Pork-Barrel Politics

The allocation of government spending for localized projects secured primarily to bring money to a representative's district, often without proper consideration of the benefits or costs.