B is corrent because the professional standards require that auditors first evaluate the company’s procedures for identifying such transactions and then ask management for a list of related parties.
A is incorrect because examining documentation such as invoices, contracts, and purchasing orders ordinarily occurs subsequently.
C is incorrect because while reviewing the company’s business structure may reveal such transactions, it is not in the professional standards as a suggested specific audit procedures to determine the existence of related parties.
D is incorrect because it is considered a procedure for identifying related-party transactions as contrasted to determining the existence of related parties.
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