On January 31, your company prepays rent of $13,250 for February and March. Which of the following describes the effects of this transaction on your company's accounting equation?
A. Liabilities decrease $13,250 and stockholders' equity increases $13,250.
B. Assets increase $13,250 and stockholders' equity increases $13,250.
C. Assets decrease $13,250 and liabilities decrease $13,250.
D. There is no change to total assets, liabilities or stockholders' equity.
Answer: D
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The board of directors consists entirely of personal friends of the chief executive officer. This indicates a weakness in
a. the accounting system b. the control environment c. control procedures d. this is not a weakness
An auditor adjusts the audit plan by introducing unexpected audit procedures in response to what the auditor believes management may be doing to conceal a fraud based on management's strategic reasoning. Which order of reasoning is occurring here?
a. Low-order reasoning b. Zero-order reasoning c. Higher-order reasoning d. First-order reasoning
A major disadvantage of the scattergraph method of analyzing cost behavior is:
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Which of the following is not a derivative?
a. forward foreign exchange contract b. swap contract c. forward commodity contract d. a share of nonconvertible preferred stock e. Eurodollar future