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What are related party transactions and how should the audit team evaluate related party transactions?

A related party transaction is when the company has a transaction with another party that has a pre-existing relationship with the company. 

For example, if the CEO personally owns an office and rents it to the company, that is an example of a related party transaction.

In order to prevent risks associated with related party transactions, the auditor should perform procedures to obtain an understanding of the company’s relationships and transactions with its related parties, as follows:

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