# Related Party Transactions in Bank Statements

- Author: PreciseBankFlow (https://precisebankflow.com)
- Published: 2026-10-17
- Category: Bank statements in an audit
- Canonical: https://precisebankflow.com/blog/related-party-transactions-in-bank-statements

> How to find related party transactions in bank statements: names, addresses and round transfers, matched against disclosures and the related party list.
Related party transactions in bank statements show up as payments to, or receipts from, people and entities connected to the client: owners, their relatives, and companies they control. You find them by searching every statement line against a list of related names, accounts and addresses, flagging round or unusual transfers, and comparing what you find with the disclosure note.

## Where do related party transactions appear in bank statements?

Related party money usually moves through ordinary-looking lines: wires, ACH payments, transfers and checks. The description field carries the clue, if it carries anything, in the form of a payee name, a memo or a counterparty account number. Payroll, rent, loans, management fees and reimbursements are the categories where related party payments most often sit.

Start with the lines that are easiest to miss. Transfers between the client and an account at the same bank often print only a partial account number and the word "transfer". An owner who moves money from the company to a personal account at the same bank can produce a line that reads "ONLINE TRANSFER TO CHK ...7731" and nothing else. That line is a related party transaction until proven otherwise, and the only way to prove otherwise is to identify the receiving account.

Other common homes for related party activity:

- **Rent.** A business that leases its building from its owner pays rent to a property entity with a different name.
- **Management and consulting fees.** Fees to a company owned by a director or a director's family.
- **Loans in either direction.** Advances to the owner, repayments that come back as round amounts, or capital introduced and taken out again.
- **Vendor payments.** A supplier owned by an employee's relative, paid through the normal payables run.
- **Credit card payments.** The company pays a card statement that includes personal spending.

A bank statement is strong evidence of a payment, but it rarely shows the relationship. The post on [bank statements as audit evidence](/blog/bank-statements-as-audit-evidence) sets out what statements prove and where you need other documents beside them.

## Building a related party search list of names, accounts and addresses

A related party search list is the set of terms you search the statements for. It starts with management's list of related parties and grows from public records, ownership documents, payroll files and the vendor master. Each entry should carry every form in which the party could appear on a statement.

For each related party, record:

1. **Legal name and common short forms.** "Northgate Holdings LLC" may print as "NORTHGATE HLDGS" or "NGH LLC".
2. **Trade names.** A company can trade under a name nothing like its legal one.
3. **Individuals' names in several orders.** First-last, last-first and initials.
4. **Addresses.** A vendor that shares an address with a director is worth knowing about, even if the names differ.
5. **Bank account numbers.** Where you have them, the last four digits are often all a statement prints.
6. **Tax identification numbers.** Useful for matching against the vendor master and year-end information returns, not the bank statement itself.

Do not rely only on management's list. Compare it with the shareholder register, board minutes, prior-year files and the vendor master. Matching vendor addresses and bank details against employee addresses and bank details is one of the most productive steps, because it finds relationships nobody thought to mention. Under IFRS, [IAS 24 Related Party Disclosures](https://www.ifrs.org/issued-standards/list-of-standards/ias-24-related-party-disclosures/) requires the nature of each relationship and information about the transactions and balances to be disclosed, so a relationship missing from the list is also likely missing from the note.

## Round transfers, owner loans and other related party payment patterns

Some payment patterns point to related parties even when no name matches. Round amounts with no invoice, money that leaves and returns within days, payments just under an approval limit and transfers on weekends or at period end are the patterns to filter for. None of them proves a relationship, but each one is cheap to ask about.

### Patterns worth a filter

- **Round-dollar transfers.** 25,000.00 out on the 3rd and 25,000.00 back on the 28th looks like a short-term loan to someone, often an owner.
- **Period-end round trips.** Money that comes in just before year end and leaves just after can dress up a balance sheet. When the money comes from an owner, it may also need disclosure.
- **Recurring fixed payments with vague descriptions.** "CONSULTING" every month for the same amount to an entity with no visible staff.
- **Payments to individuals outside payroll.** An ACH payment to a named person who is not on the payroll register and not a contractor in the vendor file.
- **Counterparty accounts that receive from the client and also pay the owner.** When you can see both sides, a chain like that is a strong lead.

### Cash pledged or held for a related party

Watch also for balances, not just flows. Cash the company has pledged as security for a loan to its owner, or holds on behalf of an affiliate, may not be freely available. The guide to [auditing restricted cash](/blog/restricted-cash-audit) covers how to identify and present cash that carries such a condition.

## Matching related party bank activity to the disclosure note

The disclosure check compares two lists: what moved between the client and its related parties according to the statements, and what the draft financial statements say. Every material flow and every year-end balance with a related party should appear in the note, described by the nature of the relationship and the type of transaction.

Build a summary by party. For each one, total the payments out and the receipts in for the year, and note the balance owed either way at year end. Then hold that summary against the note line by line. Three kinds of mismatch come up:

- **A party on the summary but not in the note.** Either the relationship was not known to the preparer or the amount was judged too small. Find out which.
- **A note figure that does not match the summary.** Often the note was drafted from the ledger, which recorded the transactions net or in the wrong account.
- **Terms described as arm's length without support.** A note that says a lease is at market rent needs evidence beyond management's word.

Record the comparison as a workpaper with each difference and its resolution. The layout in the [reconciliation report sample](/blog/reconciliation-report-sample) works well here, because each exception sits beside its evidence and its sign-off.

## A worked related party statement search for a property manager

A property management company is a useful example because related party payments are built into the business. Owners often own the buildings, relatives often run the maintenance contractors, and money passes through operating and trust accounts. The search below uses example values for illustration only.

Assume the related party list names: the owner, Dana Ruiz; her brother, Mark Ruiz; Ruiz Building Services LLC, owned by Mark; and Westlake Plaza LLC, which owns an office building and is owned by Dana.

| Statement line (example) | Amount | Matched party | How matched | In disclosure note? |
| --- | ---: | --- | --- | --- |
| ACH RUIZ BLDG SVCS INV 2207 | 14,800.00 | Ruiz Building Services LLC | Name | Yes |
| CHK 4419 PAYEE WESTLAKE PLZ | 6,500.00 | Westlake Plaza LLC | Name on check image | Yes |
| ONLINE TRANSFER TO CHK ...7731 | 20,000.00 | Dana Ruiz | Account number on owner's expense claim | No |
| ACH PMT MR HANDYMAN CO | 3,250.00 | Mark Ruiz | Vendor address matches Mark's home address | No |
| WIRE IN FROM ...7731 | 20,000.00 | Dana Ruiz | Same account as transfer above | No |

Example values only.

The first two lines were already known and disclosed. The next three are the reason for the search. The 20,000.00 out and 20,000.00 back to the same account look like a short-term loan to the owner, which needs disclosure whether or not it was repaid before year end. The handyman vendor paid 3,250.00 shares an address with the owner's brother, which may mean a second related entity nobody listed.

A property manager that keeps its books in property software will usually reconcile each bank account inside that system. The guide to [AppFolio bank reconciliation](/blog/appfolio-bank-reconciliation) explains how those reconciliations are produced, which is useful context when the operating account and the trust accounts sit in the same software.

## What if bank statements show a related party management never named?

An undisclosed related party is a finding about management's representations as much as about the numbers. Ask management directly, in writing, about the relationship and the transactions. Then reconsider how much you can rely on their other representations, extend the search to other periods and accounts, and tell those charged with governance.

### Steps to take

1. **Confirm the relationship.** Get ownership records, a corporate registry extract or a signed statement from the party.
2. **Total the activity.** Search every account for every period in scope, not just the statement where the line turned up.
3. **Assess the terms.** Compare prices or rates with independent alternatives where you can.
4. **Update the note and the representation letter.** The note needs the relationship; the letter should name it.
5. **Reassess risk.** Ask why it was missed. An honest oversight and a concealed arrangement call for very different responses.

### When not to jump to fraud

Most undisclosed relationships are oversights. A bookkeeper who has always paid a relative's cleaning company may simply not know it counts. Treat the first finding as a question rather than an accusation, and let the answers and the pattern decide how far the work goes.

Running dozens of names and account numbers across a year of statements by hand is slow and easy to get wrong. [PreciseBankFlow](/get-started) is built to extract every statement line with its description and amount and export the lines to Excel, so the search can run on all of the activity, not a sample.