Transactions with related parties are important to auditors because:
A) there is a risk that they weren't valued at the same amount as they would have been if the transactions had been with an independent third party.
B) they result in assessment of inherent risk as high.
C) of the financial statement disclosure requirements under Australian accounting standards.
D) all of the above

Question

Quizplus · Accepted Answer

Auditors need to be cautious about related party transactions because there is a potential risk that these transactions were not conducted at arm's length and may not have been valued at their fair market value. This can lead to material misstatements in financial statements. Related party transactions can also increase the inherent risk associated with the audit. Finally, regulators require that companies disclose related party transactions in their financial statements as part of their disclosure requirements under Australian accounting standards.

Transactions with Related Parties Are Important to Auditors Because