Which of the following factors most likely would heighten an auditor's concern about the risk of fraudulent financial reporting?
A)Inability to generate cash flows from operations while reporting substantial earnings growth.
B)Management's lack of interest in increasing the entity's earnings trend.
C)Large amounts of liquid assets that are easily converted into cash.
D)Inability to borrow necessary capital without granting debt covenants.

Question

Quizplus · Accepted Answer

Inability to generate cash flows from operations while reporting substantial earnings growth can indicate that the reported earnings may be fraudulent and not based on actual business operations. This discrepancy could suggest that management is purposely manipulating financial statements to deceive investors and analysts.

Which of the Following Factors Most Likely Would Heighten an Auditor's