AICPA

FOR IMMEDIATE RELEASE

Contact: Linda Dunbar
(212) 596-6236

Steve Goldfarb
(212) 596-6118
sgoldfarb@aicpa.org

AICPA Issues Related Party Toolkit: Valuable Guidance for Accountants and Auditors

New York, January 7, 2002 - The American Institute of Certified Public Accountants (AICPA) has issued an electronic document, which is available at http://www.aicpa.org/news/relpty1.htm. This document, written for accountants and auditors with the counsel of the eight largest U.S. accounting firms - Andersen, BDO Seidman, Deloitte and Touche, Ernst & Young, Grant Thornton, KPMG, McGladrey & Pullen, and PriceWaterhouseCoopers - provides guidance on the timely subject of related parties and related party transactions, one of the more important but more difficult aspects of a financial statement audit. This aspect of the audit is important because:

1) generally accepted accounting principles (GAAP) require disclosure of material related party transactions and certain control relationships;
2) in the absence of adequate disclosure, financial statements may be distorted or misleading and;
3) the instances of fraudulent financial reporting and misappropriation of assets that have been facilitated by the use of an undisclosed related party.

An undisclosed related party is a powerful tool in the hands of an unscrupulous person. Related parties, such as controlled entities, principal stockholders or management can execute transactions that improperly inflate earnings by masking their economic substance or distort reported results through lack of disclosure, or can even defraud the company by transferring funds to conduit related parties and ultimately to the perpetrators.

"Recent business events reflect the increasing use of complex business structures that include off-balance sheet entities," said Chuck Landes, Director of Audit & Attest Standards for the American Institute of Certified Public Accountants and editor of the guide. "Because some of these entities may be related parties, the proper accounting and auditing of such transactions requires sound understanding and extremely careful analysis. This toolkit will aid in better understanding some of the current issues as they pertain to related parties and related party transactions."

In addition to a summary of existing accounting and auditing literature on the subject, the toolkit also contains illustrative checklists and other tools that CPAs may find useful in helping to comply with related party auditing and accounting standards.

***

The AICPA is the national, professional organization of CPAs, with more than 340,000 members in business and industry, public practice, government, end education. It sets U.S. auditing and professional ethical standards and, with the Financial Accounting Standards Board, U.S. accounting standards. The AICPA is the first national, professional association to be ISO 9001-certified, in recognition of its quality management and assurance practices. (www.aicpa.org)