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.

---

Definitions:

Cash Payments

Transactions where payment for goods, services, or obligations is made using physical currency or checks instead of digital means.

Collections

The act of receiving payments for bills or accounts receivable, often referring to efforts made to gather overdue payments.

Reconciling Items

Adjustments made to reconcile differences between two sets of records or accounts, often used in the context of comparing bank statements to internal records.

Journal Entry

Journal entry is the method by which financial transactions are recorded in an organization's accounting records, specifying the accounts affected and the direction (debit or credit) of the transaction.