Related-party balances that survive auditor scrutiny
Related-party testing rarely fails because the amounts are secret. It fails because the paper trail is thin: no signed agreement, no pricing rationale, no evidence that the board knew.
Keep a living schedule of entities under common control, key management, and significant shareholders. Update it when ownership changes — do not rebuild it from memory at year-end.
For each material transaction type, retain the contract, invoices, and evidence of settlement. If pricing follows a group policy, put that policy in the file with an example calculation.
Disclosures should be drafted by someone who has read the ledger extract, not only the prior-year note. Rolling forward last year’s wording while volumes doubled is a common source of review comments.
If a balance will not be settled in cash on ordinary terms, say so early. Auditors can work with unusual arrangements; they cannot invent documentation that was never created.