ExamTopics Logo
Mail Us[email protected]
Menu
Aicpa Discussions
exam questions

Exam AUD All Questions

View all questions & answers for the AUD exam
Go to Exam

Exam AUD topic 1 question 714 discussion

Actual exam question from AICPA's AUD
Question #: 714
Topic #: 1
[All AUD Questions]

After determining that a related party transaction has, in fact, occurred, an auditor should:

  • A. Add a separate paragraph to the auditor's standard report to explain the transaction.
  • B. Perform analytical procedures to verify whether similar transactions occurred, but were not recorded.
  • C. Obtain an understanding of the business purpose of the transaction.
  • D. Substantiate that the transaction was consummated on terms equivalent to an arm's-length transaction.
Show Suggested Answer Hide Answer
Suggested Answer: C 🗳️
Choice "C" is correct. After identifying the occurrence of a related party transaction, the auditor should apply the procedures considered necessary to obtain satisfaction concerning the purpose and nature of the transaction and its effect on the financial statements.
Choice "A" is incorrect. While an extra paragraph may be added to emphasize a matter, there is no requirement that related party transactions be disclosed via explanatory language added to the auditor's report.
Choice "B" is incorrect. Analytical procedures are generally not effective in the identification of related party transactions.
Choice "D" is incorrect. It will generally not be possible to substantiate representations that the transaction was consummated on terms equivalent to those that would have prevailed in an arm's-length transaction.
by gemazyni at April 5, 2025, 5:01 p.m.

Comments

Chosen Answer:
This is a voting comment (?). It is better to Upvote an existing comment if you don't have anything to add.
Switch to a voting comment New
Submit Cancel
Currently there are no comments in this discussion, be the first to comment!
Community vote distribution
A (35%)
C (25%)
B (20%)
Other
Most Voted
A voting comment increases the vote count for the chosen answer by one.

Upvoting a comment with a selected answer will also increase the vote count towards that answer by one. So if you see a comment that you already agree with, you can upvote it instead of posting a new comment.

SaveCancel
exam
Someone Bought Contributor Access for:
SY0-701
London, 1 minute ago