A beginner’s guide to understanding your audit – Part 4: Related party balances:
HLB Berman Fisher
We are more than just numbers people. We build relationships with you to help you succeed.
Related party transactions and balances are material in nature and therefore your auditor will usually request evidence to support these specific balances. Your auditor is looking to determine who the parties in the transaction are, the amounts, the nature of the transaction and to determine if the transaction is at arm's length or not. Your auditor is also required to ensure that adequate disclosure of related party balances and transactions is made in the financial statements.
Your auditor will usually request to send independent confirmations to your related parties to confirm the balances directly with the related party.
In order to ensure an efficient audit, consider keeping a comprehensive list of related parties and any transactions and balances held with them during the year.?