Probe - Accounting, Auditing and Taxation

Research on definition, fraud methods, and audit countermeasures of implicit related-party transactions

Xueyi Zhao

National Audit School, Nanjing Audit University

DOI: https://doi.org/10.59429/paat.v7i4.12459

Keywords: hidden related-party transactions; de-association; information disclosure; identification of related parties; industrial and commercial big data

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Abstract

With the increasing complexity and concealment of related-party transactions of listed companies, implicit related-party transactions have gradually become a new means of financial fraud, posing a severe challenge to auditing work. Research has found that implicit related-party transactions are mainly implemented through four major means: de-association of related-party relationships, third-party bridge transactions, and post-transaction de-association. However, the current regulatory penalties for implicit related-party transactions are insufficient and the penalty measures are single, which further encourages the violation of regulations by enterprises. Auditors can enhance their ability to identify and respond to implicit related-party transactions by strengthening professional skepticism, deepening the identification of related parties, applying data analysis, and optimizing audit procedures.

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