In Auditing Related Party Transactions, an Auditor Ordinarily Places Primary

question 25

Multiple Choice

In auditing related party transactions, an auditor ordinarily places primary emphasis on:

• A)the probability that related party transactions will recur.
• B)confirming the existence of the related parties.
• C)verifying the valuation of the related party transactions.
• D)the adequacy of the disclosure of the related party transactions.

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Contribution Margin

The difference between sales revenue and variable costs, indicating the contribution of sales to fixed costs and profits.

Sales Increase

A rise in the volume or amount of products or services sold by a business.

Break-Even Sales

The amount of revenue needed to cover both fixed and variable expenses, resulting in a net income of zero.