Which of the Following Best Describes the Reason That Auditors

question 51

Multiple Choice

Which of the following best describes the reason that auditors are concerned with the detection of related party transactions?

• A)The financial statements must often be adjusted for the effects of material related party transactions.
• B)Material related party transactions must be disclosed in the notes to the financial statements.
• C)The substance of related party transactions will differ from their form.
• D)In a related party transaction one party has the ability to exercise significant influence over the other party.

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Definitions:

Other Comprehensive Income

Revenues, expenses, gains, and losses that are not included in net income but affect equity.

Non-controlling Interest

A minority stake in a subsidiary not owned by the parent company, representing shareholders' equity in subsidiaries not wholly owned by the parent.

Corporations Act

Legislation that governs the functioning of corporations, including their formation, operation, governance, and dissolution.

Reciprocal Ownership Interests

Situations where two companies hold ownership interests in each other, creating a mutually interdependent relationship.