ISA 550 Related parties MCQs

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The objectives of the auditor with regard to ISA 550 are to obtain an understanding of the entity’s related party relationships and transactions
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ISA 550, Related parties

The objectives of the auditor with regard to ISA 550 are to obtain an understanding of the entity’s related party relationships and transactions. Here on MCQs.club we have prepared easy Multiple-Choice Questions (MCQs) on ISA 550, Related parties revised IFAC that fully cover the ISA 550 summary and definition, ISA 550 MCQs with answers, these MCQs are a basis of conclusions. These MCQ on SA 550 are helpful for Competitive exams, Professional Accountancy exams and Business management exams.

  1. Related parties are individuals or organisations that might have, or might be expected to have, an undue influence on the company that is being audited. Examples of related parties include:
    1. the directors and key management of a company
    2. their families
    3. other companies controlled by directors, key managers and members of their close family
    4. other companies in the same group.
    5. All of the above
  1. The approach required by IAS 24 Related party disclosures is to disclose:
    1. the relevant amounts of related party transactions
    2. the nature of the related party relationships
    3. Both A&B
    4. None
  1. The objectives of the auditor with regard to ISA 550 are to obtain:
    1. an understanding of the entity’s related party relationships and transactions
    2. sufficient appropriate audit evidence about whether related party relationships and transactions have been appropriately identified, accounted for and disclosed in the financial statements.
    3. Both A&B
    4. None
  1. Most material misstatements linked to related party transactions arise from failure by the management of the client company to disclose related party relationships and transactions to the auditor.
    1. True
    2. False
  1. What procedures the auditor is required to perform in order to understand the entity’s related party relationships and transactions:
    1. Make inquiries of management in respect of the identity of related parties, the nature of relationships and the nature of any transactions entered into with those parties during the period.
    2. Obtain an understanding of the internal controls in operation over the identification of, accounting for and disclosure of related party relationships and transactions, the authorisation and approval of significant transactions with related party and outside the normal course of business
    3. Both A&B
    4. None
  1. In making inquiries of management in respect of the identity of related parties, the auditor will obtain a list of related parties from the directors, and consider if this list is complete. Tests for completeness could include:
    1. Review working papers for previous years, to look for names of known related parties.
    2. Ask previous auditors of the company about their knowledge of related parties.
    3. Review shareholder records for the names of major shareholders.
    4. All of the above
  1. The auditor may have difficulty in obtaining a complete list of related parties. Particular problem areas where the disclosure of related parties may be incomplete are:
    1. close family relationships
    2. where the related party is another business entity which is owned or influenced by a director of the client company.
    3. Both A&B
    4. None
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