Memo to the File: I have investigated the possibility of related parties associated with Plowshare. I supposed that research would identify potential related parties, so I searched for sales with large discounts, sales with a commitment to repurchase, and sales with no consideration exchanged. Although these procedures did not uncover related parties, I am fairly sure there was a related party because Plowshare sold a large quantity. of product to an organization in a foreign country. E Because this related party transaction is material, we should require management to void it and not report it on the financial statements To evaluate the audit risks associated with this transaction, we should gain an understanding of the purpose of the transaction. E We should include a statement in the management representation letter concerning related parties for Plowshare. The statement should assert that the terms of Plowshare's transactions with related parties were equivalent to those in arm's-length transactions.

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Memo to the File After conducting an investigation into the possibility of related parties ass... View the full answer