Multiple Choice
Which of the following is an example of poor internal control in an organization?
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6. Internal Controls and Reporting Cash
Fraud and the Fraud Triangle
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Which of the following problems may cause financial statements to be inaccurate?
A
Intentional misstatement of revenues by management
B
Timely and accurate recording of all transactions
C
Independent external audits with no findings
D
Strict adherence to Generally Accepted Accounting Principles (GAAP)
Verified step by step guidance1
Understand the context of the question: The problem is asking about factors that may cause financial statements to be inaccurate. This requires identifying which option could lead to inaccuracies in financial reporting.
Review each option provided: Analyze the implications of each choice on the accuracy of financial statements. For example, intentional misstatement of revenues by management directly impacts the reliability of financial data.
Evaluate the role of timely and accurate recording of transactions: This practice ensures financial statements reflect true and fair values, reducing the likelihood of inaccuracies.
Consider the impact of independent external audits: Audits conducted without findings typically validate the accuracy of financial statements, making them less likely to be inaccurate.
Assess the importance of strict adherence to GAAP: Following GAAP ensures consistency and compliance in financial reporting, which minimizes errors and inaccuracies.
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