According to professional auditing standards,which of the following best represents a type of fraudulent financial reporting?
A)Management accrues a liability and discloses the possible outcome of a lawsuit prior to settling the matter.
B)Management reclassifies a negative cash balance by decreasing cash and increasing a current liability.
C)Management discloses its failure to meet loan covenants but states that a waiver has been received.
D)Management intentionally excludes from its consolidated results a subsidiary that it controls significantly.

Question

Quizplus · Accepted Answer

Intentionally excluding a subsidiary from consolidated results is a form of fraudulent financial reporting, as it can mislead investors and stakeholders about the company's financial performance. The other options do not involve intentional misrepresentation of financial information. Option A involves proper accrual and disclosure of a possible liability, option B involves a legitimate reclassification of funds, and option C involves disclosure of a waiver for loan covenants.

According to Professional Auditing Standards,which of the Following Best Represents