The Internal Auditor of Trinity,Inc

question 7

Multiple Choice

The internal auditor of Trinity,Inc.suspected that the books of accounts did not show a true and fair value of the business.On his advice,the management of the company appointed Ravenwood to investigate into the matter.Ravenwood found that the suspicions of the internal auditor were reasonable.He created a fraud hypothesis and tested and refined the hypothesis via financial statement analysis and journal entry analysis.Which of the following should be Ravenwood's immediate next step?

• A) Present recommendations for resolution and remediation of fraudulent activities.
• B) Draw conclusions and communicate results of the analysis.
• C) Test and refine the hypothesis via interactive evidence gathering.
• D) Determine misappropriations if any and the specific scheme employed.

---

Definitions:

Debt-To-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.

Equity Multiplier

A financial leverage ratio that shows the proportion of a company's assets that are financed by shareholder's equity.

Earnings Per Share

A financial metric that indicates the portion of a company's profit allocated to each outstanding share of common stock, providing an indicator of the company's profitability.

Price-Earnings Ratio

is a measure of a company's current share price relative to its per-share earnings, used to evaluate if a stock is undervalued or overvalued.