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AICPA American Institute of Certified Public Accountants Related Party Transactions 1. This Statement provides guidance on procedures that should be considered by the auditor when he is performing an examination of financial statements in accordance with generally accepted auditing standards to identify related party transactions and to satisfy himself as to the substance of and accounting for such transactions, including financial statement disclosure. 1 The procedures set forth herein should not be considered all- inclusive. Also, not all of them may be required in every examination. 2. For purposes of this Statement, the term related parties means the reporting entity; its affiliates; 2 principal owners, management, and members of their immediate families; 3 entities for which investments 1 When financial statements are presented on a consolidated or combined basis, this Statement does not apply to transactions that are eliminated in the preparation of the financial statements. 2The term affiliate means a party that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified party. Control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a specified party whether through ownership, by contract, or otherwise. 3The term principal owner means the owner( s) of record or known beneficial owner( s) of more than 10% of the voting interests of the reporting entity. The term management means any person( s) having responsibility for achieving the objectives of the organization and the concomitant authority to establish the policies and make the decisions by which such objectives are to be pursued. It would normally include members of the board of directors, the president, secretary, treasurer, any vice president in charge of a principal business function ( such as sales, administration, or finance), and any other individual person who performs similar policy making functions. Copyright © 2975 by the American Institute of Certified Public Accountants, Inc. 1211 Avenue of the Americas, New York, N. Y. 10036 Statement on Auditing Standards Issued by the Auditing Standards Executive Committee July 1975 6