Why Are Related Party Transactions a Risk Area for Auditors

question 20

Multiple Choice

Why are related party transactions a risk area for auditors?

• A) they have minimal disclosure requirements.
• B) they have a higher than average risk of irregularities.
• C) they have a direct impact on profit.
• D) they are difficult to assess.

---

Definitions:

Incremental Revenues

Additional revenue generated from new sales activities or strategies, beyond existing income streams.

Incremental Costs

Additional costs that a company incurs when increasing its production or activities over a certain threshold.

SBU

Strategic Business Unit; a semi-autonomous unit within a firm that focuses on a specific market segment or product line.

Cash Cow

A business, product, or asset that consistently generates significant amounts of cash flow, often requiring little investment to maintain.