1.1 Refer to textbook chapter 6 section titled Evidence Needed for Related-Party Transactions and AU-C Section 550 Related Parties. AU-C 550 states that many related party transactions are in the normal course of business. In such circumstances, they may carry no higher risk of material misstatement of the financial statements than similar transactions with unrelated parties. However, the nature of related party relationships and transactions may, in some circumstances, give rise to higher risks of material misstatement of the financial statements than transactions with unrelated parties.

Select the example below that clearly represents a related party.

a. the entitys parent

b the entitys audit firm lead engagement partners spouse

c. The entity external legal counselor

d. the entity primary bank