Types of transaction - related party, Auditing

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Types of Transaction - Related Party

Fundamentally two types of transactions which arise between a related party and a company as:

A. It is usual for members of a collection to trade along with each other. Those entered in the ordinary course of business. 

B. Those not engaged in the ordinary course of business or that may include misleading presentation of the accounts or fake on the company, its creditors or members.

Type (a) commonly deserves no individual audit attention.  However the auditor must ensure which they in realty arise in of business at arm's length in the ordinary course.

Type (b) is whether problems may arise and whether scandals have occurred.

The Companies Act prohibits loans to directors and where they happens utilizes full disclosure.  The law not allows for the giving of financial assistance about the purchase of or subscription for a company's own shares.  The rights of directors the law restricts to acquire non-cash assets from the company or about the company to attain non-cash assets from its directors.  Significant shareholding of more than 5% must be notified into the company within seven days.


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