Which of the Following Factors Most Likely Would Heighten an Auditor's

question 51

Multiple Choice

Which of the following factors most likely would heighten an auditor's concern about the risk of fraudulent financial reporting?

• A) Large amounts of liquid assets that are easily convertible into cash.
• B) Low growth and profitability as compared to other entity's in the same industry.
• C) Financial management's participation in the initial selection of accounting principles.
• D) An overly complex organizational structure involving unusual lines of authority.

---

Definitions:

Capital Balances

The amounts reflected in a company's accounts representing the capital invested by its owners.

Goodwill

The value attributed to a company's brand name, customer base, good customer relations, good employee relations, and any patents or proprietary technology during acquisitions.

Personal Use

Utilization of property, goods, or services for individual rather than business or commercial purposes.

Partnership

A business arrangement that is legally recognized, involving two or more partners sharing both management responsibilities and profits.