AU-C 550

Auditors should inquire of management to identify related parties relationships.

Internal controls CANNOT mitigate related party risks.

Related party relationships are NOT fraud risk factors.

Related party transactions increase inherent risks for the audit.

Management MUST appropriately account for but NOT disclose related party transactions.

Tax returns will NEVER indicate related party relationships.

Nonrecurring transactions occurring near year-end may indicate that a related party transaction has taken place.

A declining business industry might motivate a related party transaction.

Reading the minutes of shareholder meetings would likely assist an auditor in identifying related parties.

Reviewing confirmations of loans receivable terms is useful for determining the existence of related party transactions.

A related party transaction is usually an arm’s length transaction.

Corporate executives are usually considered related parties regardless of whether they own corporate stock.

Auditors may inspect underlying contracts to find unusual related party transactions.

Auditors may contact the internal audit functions to identify related parties.

An auditor must obtain sufficient appropriate audit evidence about the appropriateness of related party disclosures.

Abnormally high or low interest rate loans may indicate related party transactions.