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Isn't That a Conflict? The Internal Auditor's Role in Scrutinizing Related Parties

Jose Tabuena | July 15, 2014

Companies have become aware that related-party transactions can raise conflicts of interest concerns, creating the appearance that decisions are made on considerations other than the best interests of the organization and its shareholders. Typically, directors prefer to avoid entering into related-party transactions, but there may be situations where a board recognizes that such a transaction may be in the best interests of the company—including, but not limited to, circumstances where it may obtain products or services on terms that are not readily available from alternative sources.

Given the recent history of related-party transactions that resulted in significant financial reporting fraud, it should come as no surprise that the Public Company Accounting Oversight Board adopted Auditing Standard No. 18, Related Parties, to address the audit...

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