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Solution
Related party transactions occur when an enterprise engages in transactions in
which one of the parties to the transaction has the ability to influence
significantly the policies of the other, or in which one party to the transaction has
the ability to influence the policies of the two transacting parties. The following
are examples of related party transactions:
Transactions with related parties are not conducted at arm's-length and thus
their form may differ from their economic substance. In cases where the form of
the transaction differs from the substance, auditors will require that the financial
statements properly reflect the substance of the transaction. Auditors also will
require that the financial statements include the following disclosures regarding
related party transactions: