Examining a Company's Relationships with Other Individuals and Entities Can

question 32

Multiple Choice

Examining a company's relationships with other individuals and entities can reveal important information about financial statement fraud. Identify the piece of information that is CORRECTLY linked to its source.

• A) Examining relationships with financial institutions will show whether there has been significant "short selling" of the company's stock.
• B) Examining relationships with related parties will show whether there are unusual transactions that significantly improve the company's reported financial performance.
• C) Examining a company's relationships with its lawyers will show whether management is able to unduly influence the selection of accounting principles and the determination of significant estimates.
• D) Examining relationships with regulatory bodies will show whether the company has recently changed legal counsel.

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