The Auditor Determines That Mathews Company Occupies the 3rd Floor

question 91

Multiple Choice

The auditor determines that Mathews Company occupies the 3rd floor of an office tower for which it pays no rent. The most likely explanation is:

• A) they got lucky the landlord hasn't noticed the lack of payments.
• B) landlord has weak internal controls over billings.
• C) related party transaction in which a major shareholder owns the office tower.
• D) Matthews Company is engaging in fraudulent activities.

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Definitions:

Inferior Good

A type of product for which demand decreases as the income of the consumer increases.

Cross Elasticity

Cross elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good, identifying substitute or complementary relationships.

Quantity Demanded

The total amount of goods or services that consumers are willing and able to buy at a specific price level, at a given point in time.

Normal Good

A type of good for which demand increases as the income of consumers increases, and vice versa.