Independent audits of related party transactions

Abstract

Related party transactions (RPTs) within an organization, if not strictly controlled, can provide direct opportunities for managers, directors and related parties to siphoning resources and expropriate assets from minority shareholders and other investors or lenders. Such complex, multi-layered transactions are often directly linked to financial scandals, fraud and a decline in earnings quality. Independent auditing plays a crucial role in ensuring the reliability of information and protecting the interests of information users. This article clarifies the challenges faced by independent auditors when auditing related party transactions. Based on this analysis, it recommends key considerations and necessary audit procedures to enhance the efficiency and quality of the audit process.