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.

Question

Quizplus · Accepted Answer

The purchase of land from an officer of the company at a price above its market value indicates a related party transaction. This may result in a conflict of interest and compromise the objectivity of the transaction. It is important to disclose related party transactions in financial statements to provide transparency and prevent financial fraud.

An Independent Auditor Finds That the Simmer Corporation Purchased Land