After Determining That a Related Party Transaction Has, in Fact

question 995

Multiple Choice

After determining that a related party transaction has, in fact, occurred, an auditor should:

• A) Add a separate paragraph to the auditor's standard report to explain the transaction.
• B) Perform analytical procedures to verify whether similar transactions occurred, but were not recorded.
• C) Obtain an understanding of the business purpose of the transaction.
• D) Substantiate that the transaction was consummated on terms equivalent to an arm's-length transaction.

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Definitions:

Short-term Creditor

A creditor that provides loans or credit to a business or individual with an expectation of repayment within a short period, typically less than a year.

Liquidity

The ability of an asset to be quickly converted into cash without losing its value.

Basic Earnings Per Share

A financial indicator that measures the net income generated per outstanding stock share.