The existence of a related party transaction may be indicated when another entity:
A)sells real estate to the corporation at a price that is comparable to its appraised value.
B)absorbs expenses of the corporation under audit.
C)borrows from the corporation at a rate of interest which equals the current market rate.
D)lends to the corporation at a rate of interest which equals the current market rate.

Question

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When another entity (presumably a related party) absorbs expenses of the corporation under audit, it may indicate the existence of a related party transaction. This is because a related party may be trying to hide or obscure certain financial information by taking on the expenses of the corporation. Options A, C, and D describe transactions that are conducted at market value, which may not necessarily be indicative of a related party transaction.

The Existence of a Related Party Transaction May Be Indicated