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:

Foreign Lender

A lender based in a different country from the borrower, often involved in international financing and loans.

Foreign Exchange

The trading of currencies against one another in the forex market or the conversion rate from one currency to another.

Alternative Exchange Rates

Exchange rates that apply in parallel exchange rate systems, where official and market-based rates exist concurrently for currency conversion.