3.Which of the following best describes a motivation for management to issue low-quality financial reports?

	The failure to ethically communicate and support a firms ethical standards.
	Ineffective board of directors.

Excess pressure on management to meet sales targets.

4. Which of the following is a potential warning sign of overstated earnings?

	Revenue of a toy retailer is higher in the fourth quarter.
	When measured over time, the ratio of cash flow to net income is less than one.

Consistent bad debt allowance relative to receivables and past credit losses.

5. Metcalf Company is in the first year of a 3-year contract to build a ship for Dolphin Cruise Lines. Due to a labor strike, Metcalf is unable to reliably estimate the total cost of the project but it is probably that the costs will be recovered. Can Metcalf recognize revenue in the first year of the contract according to U.S. GAAP and IFRS?

	GAAP: Yes; IFRS: Yes
	GAAP: No; IFRS: Yes

GAAP: No; IFRS: No