An Auditor Is Most Likely to Suspect the Existence of Undisclosed

question 4

Multiple Choice

An auditor is most likely to suspect the existence of undisclosed related parties by noticing _______.

• A)large-sales transactions
• B)abnormally long collection terms for a receivable
• C)a large number of sales to numbered corporations
• D)a significant increase in sales over the prior year

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Definitions:

Cash Payments

Transactions involving the immediate transfer of cash to settle the purchase of goods, services, or a debt.

Liabilities

Financial obligations of a business, such as loans, accounts payable, and mortgages, that it is required to pay to others.

Principles

Fundamental concepts or general laws that guide business practices, accounting standards, and financial reporting.

Internal Control

A process designed to ensure reliability in financial reporting, effectiveness and efficiency of operations, and compliance with laws and regulations.