Related Party
A related party is a person or entity connected to a company through ownership, control, or family relationship, such as a shareholder, a director, or another company under common control. Transactions with related parties get extra scrutiny in an audit or review engagement because the usual checks that come from dealing with an independent party do not apply, and financial statements generally must disclose material related party transactions regardless of whether they were priced at fair value. The same underlying idea drives the arm's length principle in transfer pricing, which asks whether related parties priced a transaction the way unrelated parties would have. Our internal audit and control service covers how related party risk is assessed.
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