Red Flags of Financial Statement Fraud Include All but Which

question 19

Multiple Choice

Red flags of financial statement fraud include all but which of the following

• A) Companies with unrealistically large growth in assets, revenues or profits
• B) Companies with a principal who has been involved in a bankruptcy
• C) Companies whose success depends on a special tax loophole or tax avoidance scheme
• D) Companies that report contingent liabilities that are reasonably possible and have the potential to create a loss for the company

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Definitions:

Common Supervision

The practice of overseeing and managing employees or departments by a single supervisor or management entity.

More Formalized

Pertains to structures or procedures being more rigorously and precisely specified or organized.

Mechanistic

describes organizations or systems that are highly structured, with clear hierarchical levels, rules, and roles, emphasizing efficiency and predictability in operations.

Organic Structure

A flexible, decentralized organizational design that emphasizes informal networks of communication and empowers employees to take decisions.