An Independent Auditor Finds That Holdaway Corporation Occupies Office Space

question 5

Multiple Choice

An independent auditor finds that Holdaway Corporation occupies office space, at no charge, in an office building owned by a shareholder. This finding likely indicates the existence of:

• A)management fraud.
• B)related party transactions.
• C)window dressing.
• D)weak internal control.

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Definitions:

Balance Sheet Approach

A method in accounting that focuses on valuing all assets and liabilities listed on the balance sheet at their current market values to provide a snapshot of a company's financial condition at a specific point in time.

Direct Write-off Approach

An accounting method for dealing with bad debts where specific accounts receivable are written off against income at the time they are determined to be uncollectible.

Normal Balance

The side of an account that is increased, which for assets, expenses, and dividends is the debit side, and for liabilities, equity, and revenue is the credit side.

Financial Statement

A documented account detailing the commercial operations and fiscal outcomes of an enterprise.