Which of the following is a red flag associated with concealed liabilities and expenses?
A) Gross margin significantly lower than industry average
B) An unusual increase in the number of days' purchases in accounts payable
C) An unusual change in the relationship between fixed assets and depreciation
D) Significant reductions in accounts payable while competitors are stretching out payments to vendors

Question

Quizplus · Accepted Answer

Significant reductions in accounts payable while competitors are stretching out payments to vendors may indicate that the company is manipulating their financial statements by concealing liabilities and expenses. This is because the reduction in accounts payable could be due to the company paying off their debts without recording it, while their competitors are trying to delay their payments as much as possible. Therefore, this is a red flag associated with concealed liabilities and expenses.

Which of the Following Is a Red Flag Associated with Concealed