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:

Indirect Approach

A communication strategy where the main point or message is not immediately presented, used often to soften the delivery of sensitive information.

Negative Messages

Communications that convey refusals, rejections, or other unfavorable information in a careful and considerate manner.

Positive Statement

An affirmation or declaration that is optimistic, constructive, and supportive in tone or content.

Negative Message

Communication that relays unfavorable information, rejections, or feedback to the recipient.