ExpertMedium1 markMultiple Choice
CPA · Question 51 · Area 3: Performing Procedures
Which of the following procedures is most likely to assist an auditor in identifying related party transactions?
Which of the following procedures is most likely to assist an auditor in identifying related party transactions?
Answer options:
A.
Performing a physical inventory count.
B.
Reviewing confirmations of loans receivable and payable for indications of guarantees.
C.
Reviewing the aging of accounts receivable.
D.
Testing the mathematical accuracy of the sales journal.
How to approach this question
Look for non-standard business terms (Guarantees, zero interest, etc.).
Full Answer
B.Reviewing confirmations of loans receivable and payable for indications of guarantees.✓ Correct
Reviewing confirmations of loans receivable and payable for indications of guarantees.
Procedures to identify related parties include reviewing minutes, inquiring of management, and reviewing confirmations for indications of guarantees or unusual terms.
Common mistakes
Selecting standard substantive tests (inventory, aging) that don't reveal relationships.
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