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

question 32

Multiple Choice

Which of the following factors would most likely increase 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:

Balance

A condition in which different elements are equal or in the correct proportions, often used in financial contexts to denote the amount of money available in an account.

Arithmetic Sequence

A sequence of numbers in which each term after the first is obtained by adding a constant difference to the preceding term.

Recursive Definition

A definition of a function, sequence, or process in which the next term is defined in terms of previous terms.

Common Difference

The consistent difference between consecutive terms in an arithmetic sequence.