The audit of related parties and the application of professional scepticism

In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again.

  1. Related parties generally carry a higher detection risk, ie the risk the audit procedures would not detect a material misstatement, which is increased because -

  2. The application of professional scepticism in performing an audit involves -

  3. Which of the following audit procedures need to be performed to obtain a detailed understanding of related party relationships and transactions -

  4. When obtaining an understanding of related parties controls in a small entity the auditor should -

  5. What records and documents should be reviewed by the auditor to search for unidentified and undisclosed related party relationships and transactions?

  6. What arrangements may indicate the existence of unidentified or undisclosed related party relationships or transactions?

  7. Which of the following transactions outside the normal course of business require inquiry of management to identify undisclosed related parties?

  8. When the auditor identifies significant related party transactions outside the normal course of business, he/she should -

  9. The existence of a related party with dominant influence represents a fraud risk factor. Which indicators may suggest the existence of such a dominant party?

  10. If the auditor identifies related parties and transactions that have intentionally not been disclosed by management, the auditor should -