- 1 Marks
AAA – L3 – SA – Q5.7 – Audit evidence
Question
Which of the following statements are correct?
1 With related party transactions, there is some risk of collusion and fraud.
2 A focus of audit attention with regard to related party transactions shall be on significant non-routine transactions.
A Statement 1 only is correct.
B Statement 2 only is correct.
C Both statements are correct.
D Neither statement is correct.
Answer
C
Explanation: Both statements are correct. Related party transactions (1) carry a risk of collusion and fraud due to their non-arm’s-length nature. Auditors focus on significant non-routine transactions (2) as these are more likely to involve material misstatements or improper disclosures, aligning with the objectives of IAS 24 for transparency.
- Tags: Disclosures, Fraud Risk, Non-routine transactions, Related Party Transactions
- Level: Level 3
- Topic: Audit Evidence
- Uploader: Salamat Hamid