IntroductionIntroduction

Introduction

3 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance on the auditor’s responsibilities and audit procedures regarding related parties and transactions with such parties when:

(a) Accounting Standard AASB 124 Related Party Disclosures, or similar requirement, is part of the applicable financial reporting framework; or

(b) in other circumstances, the auditor considers it appropriate to identify related parties and related party transactions.

4 In applying the mandatory requirements of this Auditing Standard to the audit of related party transactions and related party disclosures of public sector entities, the auditor ordinarily considers any relevant legislative requirements and the implications for audit procedures of such transactions and disclosures.

5 The auditor shall perform audit procedures designed to:

(a) obtain sufficient appropriate audit evidence regarding the:

(i) identification and

(ii) disclosure in accordance with the applicable financial reporting framework,

by those charged with governance and management of related parties and the effect of related party transactions that are material to the financial report; and

(b) reduce to an acceptably low level the risks of material misstatement in the financial report resulting from the existence of related parties and related party transactions.

6 As indicated in ASA 200 Objective and General Principles Governing an Audit of a Financial Report, in certain circumstances limitations exist that may affect the persuasiveness of audit evidence available to draw conclusions on particular assertions. Because of the degree of uncertainty associated with the assertions regarding the completeness of related parties, the audit procedures identified in this Auditing Standard will provide sufficient appropriate audit evidence regarding those assertions in the absence of any circumstance identified by the auditor that:

(a) increases the risk of material misstatement beyond that which would ordinarily be expected; or

(b) indicates that a material misstatement regarding related parties has occurred.

7 Where there is any indication that there are limitations that may affect the persuasiveness of audit evidence, the auditor shall design and perform further audit procedures whose nature, timing and extent are responsive to the assessed risks of material misstatement at the assertion level.

8 The following definitions regarding related party and related party transaction are contained in AASB 124 and are adopted for the purposes of this Auditing Standard:

(a) Related party means a party is related to an entity if: