In short
A related party is a person or entity that can control or significantly influence another, or is under common control with it, such as affiliates, principal owners (over 10%), management and their immediate families, and equity-method investees.
Key takeaways
- Related-party transactions may not be at arm's length and must be disclosed.
- The auditor stays alert for unidentified related parties throughout the audit.
- Being economically dependent on a major customer or supplier doesn't by itself make it a related party.
Where it's tested
AUD: Related Parties & Going Concern — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Because related party transactions may not be conducted at arm's length, the auditor should: