Lesson: Related Parties

This lesson delves into the concept of related parties in the context of an audit. It emphasizes that related parties are not inherently problematic, as long as they are fairly treated, properly disclosed, and do not result in misstatements. Nick Palazzolo clarifies that this discussion focuses on audits, distinguishing it from related party topics in other CPA exam sections. For small businesses, it is normal for transactions to take place between related parties, as long as adequate disclosure is maintained. The lesson also covers the auditor's responsibility to communicate any significant control deficiencies to those in charge of governance, while acknowledging that management may not always correct these deficiencies due to cost or other factors.