Which of the Following Elements,if Present,would Support a Finding of Constructive

question 38

Multiple Choice

Which of the following elements,if present,would support a finding of constructive fraud on the part of auditors?

• A)Gross negligence in conducting the engagement.
• B)Ordinary negligence in conducting the engagement.
• C)Failure to perform the engagement in accordance with the terms in the engagement letter.
• D)Actions that demonstrated scienter.

---

Definitions:

EBIT

Stands for Earnings Before Interest and Taxes, a measure of a firm's profit that includes all incomes and expenses except interest and income tax expenses.

Depreciation

The gradual reduction in the fair market value of tangible assets over time due to use, wear, and tear or obsolescence.

Dividend Increase

An action by a company to raise the amount of dividends paid per share, often seen as a sign of the company's strong financial health and future prospects.

Shareholder Scrutiny

The analysis and evaluation of a company's performance and governance by its shareholders, often to assess the effectiveness, policies, and strategic direction of management.