ICAN Professional Case Study Practice Questions - ICAN Professional Level C5 Case Study Examination Exam

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During a case evaluation of Sahara Power Plc, an accountant notes that Net Income grew by 35% YoY, but Operating Cash Flow (CFO) declined by 15% over the same period. The CFO-to-Net Income ratio fell below 0.6. What is the most critical audit concern indicated by this divergence?

High risk of aggressive accrual earnings management or uncollected revenues inflating net profit Clear proof that the company is over-investing in non-current tangible fixed assets Definitive evidence of fraudulent payroll expansion across regional operations Indication that equity holders received unrecorded cash dividend distributions

Correct Answer:

High risk of aggressive accrual earnings management or uncollected revenues inflating net profit

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