--- title: Eyes on Related Parties description: Business transactions with related parties — such as friends and relatives— may sometimes happen at above- or below-market rates. Learn more. image: https://info.mooredm.com/hubfs/secret-deal-1.jpg --- [![Moore_Doeren Mayhew_Logo_RGB_500px](https://info.mooredm.com/hs-fs/hubfs/Moore_Doeren%20Mayhew_Logo_RGB_500px.png?width=550&height=60&name=Moore_Doeren%20Mayhew_Logo_RGB_500px.png "Moore_Doeren Mayhew_Logo_RGB_500px")](https://www.mooredm.com) - [ABOUT](https://www.mooredm.com/about) - [SERVICES](https://www.mooredm.com/services) - [INDUSTRIES](https://www.mooredm.com/industries) - [LOCATIONS](https://www.mooredm.com/locations) - [PEOPLE](https://www.mooredm.com/people) - [RESOURCES](https://www.mooredm.com/publications) - [GLOBALVIEW](https://info.mooredm.com/blog) [![GlobalVIEW-Webpage-Header-final-2](https://info.mooredm.com/hs-fs/hubfs/GlobalVIEW-Webpage-Header-final-2.jpg?width=2000&height=500&name=GlobalVIEW-Webpage-Header-final-2.jpg "GlobalVIEW-Webpage-Header-final-2")](https://info.mooredm.com/blog/mooredm.com) March 22, 2022 # Eyes on Related Parties ![topicIcon](http://www.sparkreaction.com/hubfs/Oceania%20Theme%202016/Images/topicIcon.png) [Audit and Assurance](https://info.mooredm.com/blog/topic/audit-and-assurance), [Accounting](https://info.mooredm.com/blog/topic/accounting) [![eyes-on-related-parties](https://info.mooredm.com/hubfs/secret-deal-1.jpg)](https://info.mooredm.com/blog/eyes-on-related-parties) Business transactions with related parties — such as friends, relatives, parent companies, subsidiaries and affiliated entities — may sometimes happen at above- or below-market rates. This can be misleading to people who rely on your company’s financial statements, because undisclosed related-party transactions may skew the company’s true financial results. **The Hunt for Related Parties** Given the potential for double-dealing with related parties, auditors spend significant time hunting for undisclosed related-party transactions. Examples of documents and data sources that can help uncover these transactions are: - A list of the company’s current related parties and associated transactions, - Minutes from board of directors’ meetings, particularly when the board discusses significant business transactions, - Disclosures from board members and senior executives regarding their ownership of other entities, participation on additional boards and previous employment history, - Bank statements, especially transactions involving intercompany wires, automated clearing house (ACH) transfers, and check payments, and - Press releases announcing significant business transactions with related parties. Specifically, auditors look for contracts for goods or services that are priced at less (or more) favorable terms than those in similar arm’s-length transactions between unrelated third parties. For example, a spinoff business might lease office space from its parent company at below-market rates. A manufacturer might buy goods at artificially high prices from its subsidiary in a low-tax country to reduce its taxable income in the United States. Or an auto dealership might pay the owner’s daughter an above-market salary and various perks that aren’t available to unrelated employees. **Audit Procedures** Audit procedures designed to target related-party transactions include: - Testing how related-party transactions are identified and coded in the company’s enterprise resource planning (ERP) system, - Interviewing accounting personnel responsible for reporting related-party transactions in the company’s financial statements, and - Analyzing presentation of related-party transactions in financial statements. Accurate, complete reporting of these transactions requires robust internal controls. A company’s vendor approval process should provide guidelines to help accounting personnel determine whether a supplier qualifies as a related party and mark it accordingly in the ERP system. Without the right mechanisms in place, a company may inadvertently omit a disclosure about a related-party transaction. **Let’s Talk About It** With related-party transactions, communication is key. Always tell your auditors about known related-party transactions and reach out to Moore Doeren Mayhew for help disclosing and reporting these transactions in a transparent manner that complies with US Generally Accepted Accounting Principles. [Contact us today](https://info.mooredm.com/contact-mooredm) to learn more. Contact: [![Linda-Pelczarski](https://info.mooredm.com/hs-fs/hubfs/Linda-Pelczarski.jpg?width=100&name=Linda-Pelczarski.jpg)](https://www.mooredm.com/people/linda-pelczarski) [Linda Pelczarski](https://www.mooredm.com/people/linda-pelczarski)  Written by [Moore Doeren Mayhew](https://info.mooredm.com/blog/author/moore-doeren-mayhew) SHARE THIS ARTICLE | [NEXT POST](https://info.mooredm.com/blog/beneficial-ownership-information-reporting-of-us-companies-and-foreign-companies-registered-to-do-business-in-the-us-proposed-regulations) ## Get this information delivered straight to your mailbox. [![Subscribe to Our Newsletter](https://no-cache.hubspot.com/cta/default/2333341/72851b22-0bc4-4f0a-8f1a-ef88b5ca3304.png)](https://cta-redirect.hubspot.com/cta/redirect/2333341/72851b22-0bc4-4f0a-8f1a-ef88b5ca3304) ### Recent Posts #### About Us Moore Doeren Mayhew assists privately-controlled businesses—and the families who own them—in building and preserving wealth by providing privileged access to specialists, knowledge, and the highest quality personal service. Our firm combines a breadth of international audit, assurance, tax and consulting services with local market knowledge and international strength. [Learn More](http://www.mooredm.com) #### More Links - [\[fa icon="caret-right"\] Home](http://www.moorestephensdm.com/) - [\[fa icon="caret-right"\] About Us](http://www.moorestephensdm.com/about) - [\[fa icon="caret-right"\] Contact Us](https://info.mooredm.com/contact-mooredm) #### Contact Us \[fa icon="phone"\]  +1 (248) 244-3060 \[fa icon="envelope"\]  [mdm@mooredm.com](mailto:mdm@mooredm.com) \[fa icon="home"\]  305 West Big Beaver Road, Troy Michigan 48084-0231 [Linkedin](https://www.linkedin.com/company/10492787) [Twitter](https://twitter.com/moore__dm) Copyright 2026 \[fa icon="chevron-up"\]Back to top Cookie Settings