Which of the Following Would Heighten an Auditor's Concern About

question 36

Multiple Choice

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

• A) Inability to generate positive cash flows from operations, while reporting large increases in earnings.
• B) Management's lack of interest in increasing the dividend paid on common stock.
• C) Large amounts of liquid assets that are easily convertible into cash.
• D) Inability to borrow necessary capital without obtaining waivers on debt covenants.

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Definitions:

Activity Drivers

Factors that influence the cost of business activities by determining the level of effort or resources required.

Labour Hours

Refers to the total amount of work time spent by employees, including both direct and indirect labor activities.

Facility-sustaining Activities

Costs and activities associated with maintaining a manufacturing or production facility at an operational status, independent of the actual levels of production.

Batch-level Activities

Operations and tasks performed for a group of units produced as a single batch, costing is aggregated at the batch level.