Practice prompt · Q:accounting-failures-institutions-and-market-judgment/related-party-governance-001

Choose the related-party governance response

Assess relationship identification, arm's length evidence, approval, recusal, monitoring, and disclosure.

Updated Sep 10, 2026 Review due Nov 7, 2026

Practice

Check your answer

Choose a response, then check the answer and explanation.

A founder owns a building proposed for lease to the public company. Which process best supports a professional conclusion?

Choose the best answer. A Approve the lease because related-party transactions are valid whenever a director discloses the relationship orally. B Reject the lease automatically because every related-party transaction is fraudulent. C Identify beneficial ownership, compare terms and alternatives, document business purpose and substance, require conflicted-party recusal and independent approval, evaluate accounting and disclosure, and monitor changes. D Ask the external auditor to negotiate the lease so management and the board have no role.

Your answer stays on this page. It is not sent or saved.