Auditing

- Which of the following is a common incentive or condition that increases the likelihood

for fraudulent financial reporting?

a. Ineffective segregation of assets.

b. Significant related party transactions.

c. Management bonuses based on reported earnings.

d. Access to undeposited cash.

- To win a lawsuit against an auditor, third parties generally have to prove which of the

following?

a. The parties suffered a loss.

b. A loss occurred due to reliance on misleading financial statements.

c. The auditor knew, or should have known, financial statements were misleading.

d. All of the above