If an auditor discovers that a company intentionally applied loan payments to interest rather than principal,this would result in fraudulent overstatement of income.

Name: If an auditor discovers that a company intentionally applied loan payments to interest rather than principal,this would result in fraudulent overstatement of income.
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Question

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Applying loan payments more to interest than principal does not affect income directly; it affects the loan balance and interest expense, not the income statement.

If an Auditor Discovers That a Company Intentionally Applied Loan