When evaluating the financial data of a 10-year-old business that is being considered for purchase, which of the following issues will be of least concern?
A) Understated business income in an effort to minimize taxes
B) Unrealistically reduced levels of advertising cost
C) Business expenses related to personal use of vehicles
D) Not having the books for Years 1-5 due to a fire

Question

Quizplus · Accepted Answer

While not having the books for Years 1-5 due to a fire is a significant issue, it is beyond the control of the current owners and can be addressed through other means (such as reconstructing financial statements from bank statements, tax returns, and other records). On the other hand, understated business income, unrealistically reduced levels of advertising costs, and business expenses related to personal use of vehicles are all deliberate actions taken by the owners that could affect the accuracy and reliability of the financial data.

When Evaluating the Financial Data of a 10-Year-Old Business That