The client may use a variety of methods to understate liabilities,interest expense and long-term debt.These include

Question

Quizplus · Accepted Answer

Choice F, both A and D, is the best answer as it includes two methods that can be used to understate liabilities, interest expense and long-term debt. Recording capital leases as operating leases (A) avoids putting the liability on the balance sheet, and failing to disclose related-party transactions (D) can result in a higher risk associated with the debt. Choice E is incorrect as it only includes two methods, and choice G is incorrect as it includes only one method. Boxes B and C are also incorrect as failing to disclose information does not necessarily understate liabilities, interest expense and long-term debt.

The Client May Use a Variety of Methods to Understate