Conformity with International Standards Conformity with International Standards on Auditing

Conformity with International Standards on Auditing

39 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 550 Related Parties issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main differences between this Auditing Standard and ISA 550 are:

• This Auditing Standard includes the following additional mandatory requirements:

♦ The auditor shall perform audit procedures designed to 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 (paragraph 5(b)).

♦ When performing audit procedures which may identify related parties and related party transactions, the auditor shall consider the substance of the relationship and/or transaction being tested and not merely the legal form (paragraph 21).

♦ The auditor shall discuss with those charged with governance the nature, extent and business rationale of significant related party relationships and transactions, including those involving actual conflicts of interest (paragraph 31).

♦ If the auditor concludes that the related party disclosures in the financial report do not satisfy the requirements of the applicable financial reporting framework the auditor shall modify the auditor’s report in accordance with ASA 701(paragraph 38).

• This Auditing Standard includes the following mandatory requirement which is included as explanatory guidance in ISA 550:

♦ Based on the auditor’s knowledge of the business and enquiries of those charged with governance and management, the auditor shall assess the risk that related parties and related party transactions will not be identified, or that related party transactions will not be disclosed or measured in accordance with the applicable financial reporting framework (paragraph 11).

• This Auditing Standard provides explanatory guidance on the additional specific mandatory requirements that are not included in ISA 550, as follows:

♦ risk assessment procedures (paragraphs 12, 14, 15 and 16);

♦ responses to assessed risks(paragraphs 17);

♦ substance over legal form (paragraph 22); and

♦ materiality in terms of related parties (paragraphs 35 and 36).

• ISA 550 includes a Public Sector Perspective section whereas this Auditing Standard provides explanatory guidance on the application of this Auditing Standard to public sector entities (paragraph 4).

Compliance with this Auditing Standard enables compliance with ISA 550.