Some business leaders argue that related-party transactions have benefits for the reporting entity.The benefits are said to include:
A) lower legal costs associated with contracts.
B) increased profits for the related entity.
C) reduced competition among suppliers.
D) better, more reliable service and better prices.

Question

Quizplus · Accepted Answer

Related-party transactions can lead to better service and prices because the related entity may have a better understanding of the reporting entity's needs and requirements. Additionally, the related entity may be more willing to provide discounts or better terms due to the preexisting relationship. However, choices A, B, and C are not generally considered beneficial for the reporting entity as they indicate potential conflicts of interest and reduced competition, which can lead to negative consequences such as biased decision-making and increased costs.

Some Business Leaders Argue That Related-Party Transactions Have Benefits for the Reporting