Document ID: chunk:federal_register_of_legislation:F2023C01132:reg:23:p4
Version: federal_register_of_legislation:F2023C01132
Segment Type: reg
Provision Reference: reg 23 (pt 4/23)
Character Range: 17075–20356

party relationships and transactions have been appropriately identified, accounted for and disclosed in the financial report in accordance with the framework.

Definitions

10.               For the purposes of this Auditing Standard, the following terms have the meanings attributed below:

(a)                Arm's length transaction means a transaction conducted on such terms and conditions as between a willing buyer and a willing seller who are unrelated and are acting independently of each other and pursuing their own best interests.

(b)                Related party means a party that is either:  (Ref: Para. A4‑A7)

(i)                 A related party as defined in the applicable financial reporting framework; or

(ii)               Where the applicable financial reporting framework establishes minimal or no related party requirements:

                  a. A person or other entity that has control or significant influence, directly or indirectly through one or more intermediaries, over the reporting entity;

                  b. Another entity over which the reporting entity has control or significant influence, directly or indirectly through one or more intermediaries; or

                  c. Another entity that is under common control with the reporting entity through having:

i. Common controlling ownership;

ii. Owners who are close family members; or

iii. Common key management.

                  However, entities that are under common control by a state (that is, a national, regional or local government) are not considered related unless they engage in significant transactions or share resources to a significant extent with one another.

Requirements

Risk Assessment Procedures and Related Activities

11.               As part of the risk assessment procedures and related activities that ASA 315 and ASA 240 require the auditor to perform during the audit,[7] the auditor shall perform the audit procedures and related activities set out in paragraphs 12‑17 of this Auditing Standard, to obtain information relevant to identifying the risks of material misstatement associated with related party relationships and transactions.  (Ref: Para. A8)

Understanding the Entity's Related Party Relationships and Transactions

12.               The engagement team discussion that ASA 315 and ASA 240 require[8] shall include specific consideration of the susceptibility of the financial report to material misstatement due to fraud or error that could result from the entity's related party relationships and transactions.  (Ref: Para. A9‑A10)

13.               The auditor shall enquire of management regarding:

(a)                The identity of the entity's related parties, including changes from the prior period; (Ref: Para. A11‑A14)

(b)                The nature of the relationships between the entity and these related parties; and

(c)                Whether the entity entered into any transactions with these related parties during the period and, if so, the type and purpose of the transactions.

14.               The auditor shall enquire of management and others within the entity, and perform other risk assessment procedures considered appropriate, to obtain an understanding of the controls, if any, that management has