List Four Red Flags Associated with Improper Disclosure

Question

Examlex · Accepted Answer

The Answer is 1. Domination of management by a single person or small group in a non- owner-managed business with no compensating controls
2. Ineffective board of directors or audit committee oversight of the financial reporting process and internal control
3. Ineffective communication, implementation, support, or enforcement of the entity's values or ethical standards by management or the communication of inappropriate values or ethical standards
4. Rapid growth or unusual profitability, especially compared to other companies in the same industry
5. Significant, unusual, or highly complex transactions, especially those close to period end that pose difficult "substance over form" questions
6. Significant related-party transactions not in the ordinary course of business or with related entities not audited or audited by another firm
7. Significant bank accounts or subsidiary or branch operations in tax-haven jurisdictions for which there appears to be no clear business justification
8. Overly complex organizational structure involving unusual legal entities or managerial lines of authority
9. Known history of violations of securities laws or other laws and regulations, or claims against the entity, its senior management, or board members alleging fraud or violations of laws and regulations
10. Recurring attempts by management to justify marginal or inappropriate accounting on the basis of materiality
11. Formal or informal restrictions on the auditor that inappropriately limit access to people or information or the ability to communicate effectively with the board of directors or the audit committee

List Four Red Flags Associated with Improper Disclosure

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