Determine from the Following the Factor That Would Most Likely

question 42

Multiple Choice

Determine from the following the factor that would most likely elevate the auditor's concern about the risk of financial statement fraud.

• A) company cannot borrow debt capital without restrictive covenants
• B) company finds it difficult to sell equity capital for expansion
• C) company has a significant portion of liquid assets on its balance sheet
• D) company reports substantial net income but ever decreasing cash flow from operations

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Definitions:

Cognitive Approach

A psychological perspective that focuses on how people think, understand, and know about the world.

Depression

A mental disorder marked by a continuous feeling of sadness or a lack of enthusiasm for activities, resulting in considerable disruption to everyday functioning.

Interpreted

Processed or explained in a specific way to add meaning or understanding.

Production-Centered

An approach that focuses primarily on achieving high productivity and operational efficiency.