Question

which of the following, discovered during a non - issuer audit, most likely would raise a question concerning possible noncompliance with laws and regulations?
internal control material weaknesses previously reported to management were not corrected.
related party transactions, although properly disclosed, were pervasive during the year.
the entity was a campaign contributor to several local political candidates during the year.
the entity prepared several large checks payable to cash during the year.

Explanation:

• Internal control material weaknesses: While important for internal operations, not corrected weaknesses don't directly imply non - compliance with laws and regulations.
• Related - party transactions: If properly disclosed, pervasive related - party transactions are more of a disclosure and transparency issue rather than a non - compliance with laws and regulations (assuming disclosure meets legal requirements).
• Campaign contributions: Unless there are specific illegalities in the contribution amounts, methods etc. (not indicated here), being a campaign contributor is a normal political activity (in many legal frameworks).
• Checks payable to cash: Preparing large checks payable to cash can be a red - flag for money laundering, embezzlement or other illegal activities that violate financial laws and regulations.

Answer:

The entity prepared several large checks payable to cash during the year.