Related-party transactions provide management certain opportunities to manipulate financial statements.

Question

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Related-party transactions can involve transactions with entities or individuals that are closely connected to the company, such as the company's owners, executives, or family members. This can create opportunities for management to manipulate financial statements by inflating revenue, understating expenses, or manipulating the timing of transactions. As a result, these transactions require additional scrutiny and disclosure to ensure that the company's financial statements accurately reflect its financial performance.

Related-Party Transactions Provide Management Certain Opportunities to Manipulate Financial Statements