The Client May Use a Variety of Methods to Overstate

question 86

Multiple Choice

The client may use a variety of methods to overstate investment securities and cash.These include

• A)companies may manipulate the particular securities in the holding security account and the available for sale account to overstate unrealized gains from trading securities and to increase income
• B)companies may manipulate the particular securities in the trading security account and the available for sale account to overstate realized gains from holding securities and to increase income
• C)misstating the amount of cash by manipulating the adjustments done to the year-end bank reconciliation
• D)companies may manipulate the particular securities in the trading security account and the available for sale account to overstate unrealized gains from holding securities and to increase income
• E)misstating the amount of cash by manipulating the adjustments done to the year-end account reconciliation
• F)both A and B
• G)both C and D
• H)both D and E

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Definitions:

Government Intervention

Actions taken by a government to influence or regulate various activities within its economy.

Market Signals

Indicators or information that guide economic decisions by conveying important data about the conditions or trends within a market.

Adverse Selection

Adverse selection is a phenomenon in economics and insurance where parties at a disadvantage due to asymmetric information are more likely to participate in an agreement or purchase, potentially leading to a market failure.

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to another, often leading to an imbalance in power or unfair advantages.