How is C correct? Based on her analysis of Maxwell Research’s internal operations and business climate, analyst Jane Kilgore is concerned about management’s opportunities to commit fraud. Which of the following characteristics should worry Kilgore least? A) More than half of Kilgore’s revenue is generated in emerging markets. B) Kilgore’s market penetration gives it the ability to dictate terms to vendors. C) More than a third of Kilgore’s total sales go to its own consolidated subsidiaries. D) Kilgore’s widely diversified business mix makes its accounting quite complicated. Your answer: B was incorrect. The correct answer was C) More than a third of Kilgore’s total sales go to its own consolidated subsidiaries. High levels of related-party transactions are worrisome, particularly when those parties are not audited. But transactions within the company between subsidiaries consolidated in a company’s audited financial statements are neither unusual nor a particularly fertile ground for fraud. The other three characteristics are legitimate risk factors.
Schweser is correct on this one. If it was a related party transaction then the deed would had been questionable. But inter-company-subsidiary transactions are fine, so it’s LEAST chances of an fraud opportunity there.
it says LEAST, pinky?
Doesn’t matter, he’s still getting the lunchbox treatment…just as soon as Zimzim returns.