Michum Inc.has related party transactions with a company owned by the CEO's brother totalling about $500 000.There are also related party transactions with the owner (about $250)and with two of the officers ($750 and $1000)respectively.Which related parties should be identified and included in audit documentation?
A)those with material transactions only
B)those that had transactions in the current year only
C)all related parties
D)only those that could lead to a conflict of interest

Question

Quizplus · Accepted Answer

All related parties should be identified and included in audit documentation, regardless of the materiality of the transactions or whether they occurred in the current year. This is because related party transactions can potentially impact the financial statements and it is important for auditors to assess the nature and extent of these transactions to determine if they are properly disclosed and accounted for in accordance with accounting standards. Additionally, identifying all related parties helps to ensure that all potential conflicts of interest are properly evaluated.