Statement on auditing standards, 006

              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