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.

Analyze the relationship between money supply and price levels in the economy.

Evaluate the effects of changing velocity of money on economic outcomes.

Distinguish between proportional, more than proportional, and less than proportional changes in economic variables.

Understand the implications of the Quantity Theory of Money in a static economy.

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Definitions:

Marginal Revenue

The additional income that an organization receives from selling one more unit of a good or service.

Profit Maximizing

The process or strategy by which a firm adjusts its production to achieve the highest possible profit.

Price Elasticity

An assessment of the degree to which the demand for a commodity adjusts when its price changes.

Output Level

The quantity of goods or services produced by a firm or economy over a certain period.