Which of the Following Factors Most Likely Would Heighten an Auditor's

question 38

Multiple Choice

Which of the following factors most likely would heighten an auditor's concern about the risk of fraudulent financial reporting?

• A)Inability to generate cash flows from operations while reporting substantial earnings growth.
• B)Management's lack of interest in increasing the entity's earnings trend.
• C)Large amounts of liquid assets that are easily converted into cash.
• D)Inability to borrow necessary capital without granting debt covenants.

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Definitions:

Starting Material

The specific substances or chemical compounds that undergo a reaction or process to produce a desired product.

Grignard Reagent

An organomagnesium compound used in organic chemistry for forming carbon-carbon bonds.

Organolithium Reagent

Highly reactive organic compounds containing lithium used in various chemical syntheses, especially in the formation of carbon-carbon bonds.

Methanol

Known as wood alcohol, it is the simplest form of alcohol with uses ranging from solvent and antifreeze to fuel and industrial feedstock.