Question
Ô 49
Most auditors assess the risk of material misstatement as high for
related parties and related-party transactions because
• of the unique classification of related-party transactions required on the
balance sheet.
of the lack of independence between the parties.
• of the unique classification of related-party transactions required on the
income statement.
• it is required by generally accepted accounting principles.
Answer
The risk of material misstatement for related parties and related-party transactions is high due to the lack of independence between the parties and the unique classification of related-party transactions required on the balance sheet and income statement.