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In the United States, securities regulators help ensure that transactions with related parties are free of conflict and do not have a negative impact on shareholder value or corporate profits. For example, the Securities and Exchange Commission (SEC) requires all publicly traded companies to disclose all transactions with relatives – such as executives, associated companies and family members – in their quarterly reports of 10 Q and their annual reports of 10K. As a result, many companies have compliance policies and procedures that describe how transactions with associated parties are documented and implemented. It is not uncommon for companies to deal with individuals and organizations with whom they already have relationships. This type of business activity is called transactions with related parties. The most common types of related companies are related companies, shareholder groups, subsidiaries and minority companies. Transactions with related parties may include sales, leases, service agreements and credit contracts. Enron was an American energy and commodities company based in Houston. In the infamous 2001 scandal, the company used transactions with people linked to ad hoc vehicles to hide billions of dollars of debt from failed business projects and investments. The related parties misled the board of directors, their audit committee, staff and the public. This financial disaster led to the development of the Sarbanes-Oxley Act of 2002, which introduced new and expanded requirements for boards of directors, management companies and public audit firms in the United States, including specific rules limiting conflicts of interest related to transactions with relatives.

Although there are rules and standards for transactions with related parties, they are generally difficult to verify. Owners and managers are responsible for disclosing loved ones and their interests, but if they hold the disclosure for personal use, transactions may not be detected. Transactions with related companies can be accounted for in similar normal transactions, making them more difficult to distinguish them. Hidden transactions and undisclosed relationships could lead to excessive returns or even fraud. As has already been said, these types of transactions are not necessarily illegal. But they can tarnish the business environment by creating conflicts of interest, as they show favourable treatment for workers close to recruitment. Think of a company that hires a large shareholder to renovate its offices. In some cases, transactions with related parties must be approved by a company`s board of directors or board of directors. These transactions also limit competition in the market. The Financial Accounting Standards Board (FASB), which establishes accounting rules for public and private companies as well as non-profit organizations in the United States, has accounting standards for transactions with associated parties. These standards include monitoring the competitiveness of payments, payment terms, monetary transactions and authorized expenses.