Question

Examining a company's relationships with other individuals and entities can reveal important information about financial statement fraud. Identify the piece of information that is correctly linked to its source. a. Examining relationships with financial institutions will show whether there has been significant "short selling" of the company's stock. b. Examining relationships with related parties will show whether there are unusual transactions that significantly improve the company's reported financial performance. c. Examining a company's relationships with its lawyers will show whether management is able to unduly influence the selection of accounting principles and the determination of significant estimates. d. Examining relationships with regulatory bodies will show whether the company has recently changed legal counsel.

Answer 1

Answer:

Examining relationships with related parties will show whether there are unusual transactions that significantly improve the company's reported financial performance

Explanation:

Examining related parties, will help to find out if due processes and set standards were followed and applied in company transactions, as the 'significantly improved reported financial performance', may not reveal the true financial performance of the company.