An Independent Auditor Finds That the Simmer Corporation Occupies Office

question 40

Multiple Choice

An independent auditor finds that the Simmer Corporation occupies office space, at no charge, in an office building owned by a shareholder. 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:

Prejudgment Remedy

A legal mechanism that allows a plaintiff to secure assets or interests of the defendant before the final judgment in a lawsuit, to ensure satisfaction of any potential award.

Lawsuit

A legal action or proceeding involving a dispute between two or more parties that is resolved in a court of law.

Super-Priority Liens

Liens that are given the highest priority over other types of liens, often arising by statute and placed on property which can bypass previously established liens.

Artisan's Lien

A legal right granted to craftsmen or workers allowing them to retain possession of a project or property until they are compensated for the services or labor they have provided.