Question

Which of the following audit procedures would be least likely to disclose the existence of related party transactions of a client during the period under audit?

A. Reading "conflict-of-interest" statements obtained by the client from its management.
B. Scanning accounting records for large transactions at or just prior to the end of the period under audit.
C. Reading minutes of the Board of Directors meetings for authorization or discussion of material transactions.
D. Confirming purchases and sales transactions with the vendors and/or customers involved.

Answer 1

The least likely audit procedure to disclose related party transactions is confirming transactions with vendors or customers, as they may not indicate related party involvement.

Step-by-step explanation:

The audit procedure that would be least likely to disclose the existence of related party transactions of a client during the period under audit is D. Confirming purchases and sales transactions with the vendors and/or customers involved. This is because related party transactions may not be evident when confirming transactions with external parties as they may not be aware of the related party nature of the transactions.

Procedures such as reading 'conflict-of-interest' statements, scanning accounting records, and reading minutes of the Board of Directors meetings are more directly aimed at uncovering related party transactions.