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7. A financial analyst will carefully review company financial statements for evidence of transactions involving related...

7. A financial analyst will carefully review company financial statements for evidence of transactions involving related parties in part because such transactions may create the risk of wealth transfer to single stockholders.

True or False

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Answer #1

True the statement stand right. The financial analyst should thoroughly understand the transaction occurring among the related parties as there is a major chance of risk in it.

There is most fraud conducted on the transaction at related parties therefore they should be verified thoroughly.

The transaction occurred, the name of the party, their relation, and the amount of transaction that occurred should be separately maintained by management and should be verified by the investor while analyzing the financials of the entity.

The additional work would be done to maintain accuracy and provide adequate results.

The significant risk could arise if the company misunderstood the outcome and the need of deviating its strategy timely.

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