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.

Question

Quizplus · Accepted Answer

The fact that Simmer Corporation is occupying office space in a building owned by a shareholder indicates the existence of a related party transaction, which may affect the objectivity and fairness of financial reporting. This disclosure is important for investors and stakeholders to understand any possible conflicts of interest or potential biases in the financial statements.

An Independent Auditor Finds That the Simmer Corporation Occupies Office