Responses to the Risks of Material MisstResponses to the Risks of Material Misstatement Associated with Related Party Relationships and Transactions

Responses to the Risks of Material Misstatement Associated with Related Party Relationships and Transactions

1. As part of the ASA 330 requirement that the auditor respond to assessed risks,[10] the auditor designs and performs further audit procedures to obtain sufficient appropriate audit evidence about the assessed risks of material misstatement associated with related party relationships and transactions. These audit procedures shall include those required by paragraphs 21‑24 of this Auditing Standard. (Ref: Para. A31‑A34)

Identification of Previously Unidentified or Undisclosed Related Parties or Significant Related Party Transactions

1. If the auditor identifies arrangements or information that suggests the existence of related party relationships or transactions that management has not previously identified or disclosed to the auditor, the auditor shall determine whether the underlying circumstances confirm the existence of those relationships or transactions. (Ref: Para. Aus A34.1)
2. If the auditor identifies related parties or significant related party transactions that management has not previously identified or disclosed to the auditor, the auditor shall:
   1. Promptly communicate the relevant information to the other members of the engagement team; (Ref: Para. A35)
   2. Where the applicable financial reporting framework establishes related party requirements:
      1. Request management to identify all transactions with the newly identified related parties for the auditor’s further evaluation; and
      2. Enquire as to why the entity’s controls over related party relationships and transactions failed to enable the identification or disclosure of the related party relationships or transactions;
   3. Perform appropriate substantive audit procedures relating to such newly identified related parties or significant related party transactions; (Ref: Para. A36)
   4. Reconsider the risk that other related parties or significant related party transactions may exist that management has not previously identified or disclosed to the auditor, and perform additional audit procedures as necessary; and
   5. If the non‑disclosure by management appears intentional (and therefore indicative of a risk of material misstatement due to fraud), evaluate the implications for the audit. (Ref: Para. A37)

Identified Significant Related Party Transactions outside the Entity’s Normal Course of Business

1. For identified significant related party transactions outside the entity’s normal course of business, the auditor shall:
   1. Inspect the underlying contracts or agreements, if any, and evaluate whether: