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Topic
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After identifying related party transactions, an auditor most likely would:
A: Substantiate that the transactions were consummated on terms equivalent to those prevailing in arm’s-length transactions.
B: Discuss the implications of the transactions with third parties, such as the entity’s attorneys and bankers.
C: Determine whether the transactions were approved by the board of directors or other appropriate officials.
D: Ascertain whether the transactions would have occurred if the parties had not been related.
*taken from Wiley Online Test Bank. Curious if anyone else disagrees with the answer.
My answer: A
Wiley answer: C
It seems the most important & first thing you would do is see if the transaction seems fair & at arms-length. I also would have guessed that many related-party transactions would be conducted under management’s authorization and not involve the board. Everything about Wiley’s answer surprises me.
BEC - 88
AUD - 69, 74, 93
FAR - 78
REG - 79
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