An Auditor Searching for Related-Party Transactions Should Obtain an Understanding

question 30

Multiple Choice

An auditor searching for related-party transactions should obtain an understanding of each subsidiary's relationship to the total entity because:

• A)intercompany transactions may have been consummated on terms equivalent to arm's length transactions.
• B)this might reveal whether particular transactions would have taken place if the parties had not been related.
• C)the business structure may be deliberately designed to obscure related-party transactions.
• D)this might permit the audit of intercompany account balances to be performed as of concurrent dates.

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Definitions:

Median

The middle value in a sorted list of numbers, providing a measure of central tendency that is not skewed by extreme values.

Mean

The average of a set of numbers, calculated by dividing the sum of these numbers by the count of numbers in the set.

Quotient

The result obtained by dividing one quantity by another.

Rounded

The process of adjusting numbers to a specified degree of precision, often to make them simpler or more easily interpreted.