The Client May Use a Variety of Methods to Understate

question 26

Multiple Choice

The client may use a variety of methods to understate liabilities,interest expense and long-term compensation expense associated with stock options.These include

• A)Recording operating leases as capital leases to avoid putting the liability on the balance sheet.
• B)Failing to record compensation expense.
• C)Changing the interest rate used to capitalize long-term liabilities to vary the amount of interest expense
• D)Failing to disclose special arrangements,such as transactions with special purpose entities.
• E)Backdating stock options and failing to record compensation expense for the difference between the market price of the stock at the date of the grant and the price of the stock on the date of the backdating.
• F)both A and B
• G)both C and E
• H)both D and E

---

Definitions:

Efficiency Wage

is the concept that paying workers a higher wage than the market equilibrium can lead to higher productivity and efficiency, incentivizing better performance and loyalty.

Similar Job

Pertains to a job that has duties, skills, and responsibilities closely matching those of another job, often within the same industry or field.

Adverse Selection

A situation where asymmetric information results in high-risk individuals being more likely to participate in an agreement than low-risk individuals, typically in insurance markets.

Used Cars

Pre-owned vehicles that have been previously registered and are available for resale, often at lower prices compared to new cars.