hard20 pts · first answer countsrelated-partiesfraud-risk

An undisclosed related party purchase

The auditor finds that the company bought land from a firm owned by a director’s brother at well above market value. It is not disclosed as a related party transaction, and board approval is missing. What is the right response?

A.Ignore it, since land purchases are in the ordinary course of businessB.Mention it only in the management letterC.Treat it as immaterial because it is a one-offD.Treat it as a disclosure misstatement, check compliance with Companies Act approvals, reassess fraud risk and consider the effect on the opinion

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An undisclosed related party purchase

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