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Related Party Transactions Audit Guide

The document discusses related party transactions and management representations. It notes that auditors should examine large or unusual transactions near year-end for indications of relationships. If related party transactions are found, the auditor should understand the business purpose, examine supporting documents, determine if the directors approved, and evaluate disclosures. The document also states that management must provide written representations that all relevant information was provided, responsibility for financial statements rests with them, subsequent events or plans could affect values, and any noncompliance or major events have been disclosed.

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Hazem El Sayed
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6 views2 pages

Related Party Transactions Audit Guide

The document discusses related party transactions and management representations. It notes that auditors should examine large or unusual transactions near year-end for indications of relationships. If related party transactions are found, the auditor should understand the business purpose, examine supporting documents, determine if the directors approved, and evaluate disclosures. The document also states that management must provide written representations that all relevant information was provided, responsibility for financial statements rests with them, subsequent events or plans could affect values, and any noncompliance or major events have been disclosed.

Uploaded by

Hazem El Sayed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as RTF, PDF, TXT or read online on Scribd

Related Parties (continued)

,
·1 Examine transactions with major customers, supplier, borrowers, & lenders for indica-
tions of relationship
Examine large, unusual, or nonrecurring transactions at or near year-end
Examine confirmations of loans receivable & payable for guarantees
If related-party transactions are identified, auditor should
Obtain understanding of business purpose of transaction
·2 Examine invoices, agreements, & contracts
·3 Determine whether the directors have approved the transaction
·4 Evaluate disclosures for reasonableness

Focus on
Evidence - Module 3 140

Management Representations
The auditor must obtain written representations from management indicating
·5 Information & data was available to the auditor during the examination
·6 Responsibility for the financial statements rests with management
Errors, fraud, & material litigation that are known at year-end have been communicated
·7 Subsequent events that may effect carrying values have been communicated
·8 Plans of the company that may effect carrying values have been
communicated
Oral information provided to the auditor was accurate & complete
Noncompliance with laws & regulations that are known at year-end have been communi-
cated
Disclosure of major transactions, events, or circumstances affecting the client at year-
end has been made

When the auditor asks me a question, I RESPOND

Focus on
Evidence - Module 3
141

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