Which of the following statements is false regarding the formation of a principal-agent relationship?
A. An agency must have a legal purpose.
B. An agency may be implied in law, even if the principal did not intend to grant authority.
C. The test for agency is objective.
D. Each element of a contract must be present for the relationship to exist.
Answer: D. Each element of a contract must be present for the relationship to exist.
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Which of the following is an example of exercising internal control over receivables?
A) separating cash collection and credit approval duties B) extending credit to all customers who apply for credit C) combining the duties of the credit and accounting departments D) allowing credit department employees to collect cash from customers
In Germany, prudence is an accounting principle established in commercial law. What does "prudence" mean in an accounting context?
A. Reliability B. Comparability C. Conservatism D. Relevance