Final answer:
The auditors' main concern with the decline of PE and EPS ratios at CleteCorp is likely that management is under pressure to manipulate earnings in response to lowered market expectations and potential governance issues. Option 4.
Step-by-step explanation:
When auditors observe that the Price-Earnings (PE) and Earnings Per Share (EPS) ratios of CleteCorp are in decline, their most likely concern is that management is under pressure to manipulate earnings. A declining PE ratio may indicate that the market has lowered its expectations for the company's future growth, while a declining EPS could suggest that the company's profitability is worsening. Either situation could tempt management to artificially inflate earnings to meet the expectations of analysts and investors.
This concern stems from the concept that stock prices are based on expectations about the company's future performance. If accurate information is not available due to corporate governance issues, investors cannot make well-informed decisions. The role of corporate governance is crucial as it involves institutions responsible for monitoring executive actions, thereby protecting the integrity of financial information.