An Independent Auditor Finds That the Simmer Corporation Purchased Land

question 6

Multiple Choice

An independent auditor finds that the Simmer Corporation purchased land owned by an officer of the company for an amount in excess of its asking price.This finding indicates the existence of:

• A)Management fraud.
• B)Related party transactions.
• C)Window dressing.
• D)Weak internal control.

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Definitions:

Split-off

A point in a production process where multiple products are generated from a single input, each having its own identifiable market.

Joint Production Costs

Costs incurred during the process of producing multiple products simultaneously where the costs cannot be attributed to individual products easily.

Relative Sales Value Method

A method used to allocate joint costs based on the relative sales value of the products produced from the same process or operation.

Allocated

The distribution of resources, costs, or expenses to specific departments, projects, or cost centers according to a predetermined method.