PCAOB on Related Parties Flashcards

1
Q

What needs to be communicated with the audit committee?

A
  • Evaluation of identification and related parties
  • Related party issues undisclosed to the auditor
  • Transactions not authorized by established policies
  • Transactions lacking appropriate business purpose
  • Management assertions that related party transactions were equivalent to arm-length transaction
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2
Q

Does the auditor needs to evaluate the financial capability of the related parties with respect to their significant responsibilities in connection with the transactions?

A

YES

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3
Q

Do auditors need to make sure the transactions have been authorized and approved in accordance with the companies policies on related party transactions?

A

YES

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4
Q

Do auditors need to read applicable underlying documents for consistency with explanations about the business purpose obtained from inquiries and other procedures performed?

A

YES

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5
Q

Do auditors need to obtain written representation from the company’s lawyers that related-party transactions comply with applicable laws and regulations?

A

NO

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6
Q

How can auditors identify undisclosed related party transactions?

A

1) Purchasing or selling at significantly different than market prices
2) sales transactions that have unusual terms (bill and hold)
3) Borrowing and lending at significantly different than normal terms
4) Advancing funds that are used to pay for otherwise uncollectible receivables
5) Guarantees outside the normal course of business

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