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The surveillance of a supreme audit institution on related party transactions

Gustavo Cesário (Brazilian School of Public and Business Administration, Fundação Getulio Vargas, Rio de Janeiro, Brazil)
Ricardo Lopes Cardoso (Brazilian School of Public and Business Administration, Fundação Getulio Vargas, Rio de Janeiro, Brazil) (Business and Finance School, Universidade do Estado do Rio de Janeiro, Rio de Janeiro, Brazil)
Renato Santos Aranha (Systems and Computing Department (PESC), COPPE, Federal University of Rio de Janeiro (UFRJ), Rio de Janeiro, Brazil)

Journal of Public Budgeting, Accounting & Financial Management

ISSN: 1096-3367

Article publication date: 17 July 2020

Issue publication date: 19 October 2020




This paper aims to analyse how the supreme audit institution (SAI) monitors related party transactions (RPTs) in the Brazilian public sector. It considers definitions and disclosure policies of RPTs by international accounting and auditing standards and their evolution since 1980.


Based on archival research on international standards and using an interpretive approach, the authors investigated definitions and disclosure policies. Using a topic model based on latent Dirichlet allocation, the authors performed a content analysis on over 59,000 SAI decisions to assess how the SAI monitors RPTs.


The SAI investigates nepotism (a kind of RPT) and conflicts of interest up to eight times more frequently than related parties. Brazilian laws prevent nepotism and conflicts of interest, but not RPTs in general. Indeed, Brazilian public-sector accounting standards have not converged towards IPSAS 20, and ISSAI 1550 does not adjust auditing procedures to suit the public sector.

Research limitations/implications

The SAI follows a legalistic auditing approach, indicating a need for regulation of related public-sector parties to improve surveillance. In addition to Brazil, other code law countries might face similar circumstances.


Public-sector RPTs are an under-investigated field, calling for attention by academics and standard-setters. Text mining and latent Dirichlet allocation, while mature techniques, are underexplored in accounting and auditing studies. Additionally, the Python script created to analyse the audit reports is available at Mendeley Data and may be used to perform similar analyses with minor adaptations.



During the research, the authors received funds from the Higher Personnel Advancement Coordination (CAPES – 31011012004P5 (GC), 88881.310390/2018-01 (GC and RLC), 88882.184085/2000-01 (GC and RLC); Rio de Janeiro State Research Foundation (FAPERJ – www.faperj. br): E-26/202.517/2019 (RLC), E-26/211.165/2019 (RLC), and from Fundação Getulio Vargas (FGV – 163210 (RLC) and 163103004 (GC). The institutions mentioned above do not have any responsibility for data collection and estimation. The views expressed in this paper represent the authors’ point of view and not from any institution


Cesário, G., Cardoso, R.L. and Aranha, R.S. (2020), "The surveillance of a supreme audit institution on related party transactions", Journal of Public Budgeting, Accounting & Financial Management, Vol. 32 No. 4, pp. 577-603.



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