[heyjustin]

Which of the following is an illegal act that has an indirect effect on the financial statements?
(a) Fraud detected in the payment cycle by the auditor.
(b) Bribing local officials for favorable lease terms.
(c) Failure to pay required taxes.
(d) Placing foreign substances in food in an effort to save money

The answer is D. But I have no idea about this answer? Need help, please..

[Missy]

The other three answers have a direct affect on the financial statements.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Anonymous]

Let's think through this. I think the key word here is indirect.

A. Deals with fraud in the payment cycle. This should affect cash and revenues.
B. Bribes for favorable lease terms. This will affect assets and liabilities presuming that it's longer than a year.
C. Doesn't pay required taxes. I believe that would affect both expenses and cash.
D. Tampers with food to save money. Although terrible, this doesn't affect any accounting directly (although I'd suspect down the road you might need a good lawyer).

So D it is.

[Author]

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