Q.Transactions with related parties (such as directors or their relatives) should be:
(A) Ignored entirely, since they fall outside the ordinary scope of an audit
(B) Checked in full, given the inherently higher risk of conflict of interest or manipulation
(C) Sampled at the same rate as any other routine transaction
(D) Checked only if the client specifically requests it

Related-party transactions carry a structurally higher risk that sampling cannot adequately cover.

Related-party transactions — those involving directors, their relatives, or associate/subsidiary companies — are explicitly listed in Section d as a category unsuitable for test checking. The reasoning is straightforward: such transactions carry an inherently higher risk of conflict of interest, favourable treatment, or deliberate manipulation, precisely because the parties involved are not at arm's length from the business's own decision-makers. Diluting this risk by treating such transactions as part of a larger, mostly-routine sample would be inappropriate; each one must instead be individually examined in full.

Option-by-option analysis:

• (A) Incorrect — related-party transactions are squarely within the ordinary scope of an audit; ignoring them would leave a genuine, well-recognised risk area entirely unchecked. …