AS 18: New Guidance for Auditing Related Party Transactions

Undisclosed related‐party transactions played a significant role in high‐profile accounting scandals such as Enron, Tyco, and Adelphia. Public Company Accounting Oversight Board (PCAOB) inspectors have discovered many shortcomings in audit procedures applied to related party transactions, and the Securities and Exchange Commission (SEC) has sanctioned numerous CPA firms for failing to identify or disclose clients' transactions with affiliated entities. This article identifies the risks associated with related party transactions and describes audit procedures to provide reasonable assurance that all such transactions are properly identified, accounted for, and disclosed in the financial statements. © 2017 Wiley Periodicals, Inc.