Document ID: chunk:federal_register_of_legislation:F2023C01132:reg:23:p8
Version: federal_register_of_legislation:F2023C01132
Segment Type: reg
Provision Reference: reg 23 (pt 8/23)
Character Range: 29431–32514

party relationships and transactions in accordance with the applicable financial reporting framework;

the auditor shall modify the auditor's opinion in accordance with ASA 705.

Aus 27.2 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 opinion in accordance with ASA 705.

Documentation

28.               The auditor shall include in the audit documentation the names of the identified related parties and the nature of the related party relationships.[14]

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Application and Other Explanatory Material

Responsibilities of the Auditor

Financial Reporting Frameworks That Establish Minimal Related Party Requirements (Ref: Para. 4)

A1.             An applicable financial reporting framework that establishes minimal related party requirements is one that defines the meaning of a related party but that definition has a substantially narrower scope than the definition set out in paragraph 10(b)(ii) of this Auditing Standard, so that a requirement in the framework to disclose related party relationships and transactions would apply to substantially fewer related party relationships and transactions.

Fair Presentation Frameworks (Ref: Para. 4(a))

A2.             In the context of a fair presentation framework,[15] related party relationships and transactions may cause the financial report to fail to achieve fair presentation if, for example, the economic reality of such relationships and transactions is not appropriately reflected in the financial report.  For instance, fair presentation may not be achieved if the sale of a property by the entity to a controlling shareholder at a price above or below fair market value has been accounted for as a transaction involving a profit or loss for the entity when it may constitute a contribution or return of capital or the payment of a dividend.

Compliance Frameworks (Ref: Para. 4(b))

A3.             In the context of a compliance framework, whether related party relationships and transactions cause the financial report to be misleading as discussed in ASA 700 depends upon the particular circumstances of the engagement.  For example, even if non‑disclosure of related party transactions in the financial report is in compliance with the framework and applicable law or regulation, the financial report could be misleading if the entity derives a very substantial portion of its revenue from transactions with related parties, and that fact is not disclosed.  However, it will be extremely rare for the auditor to consider a financial report that is prepared and presented in accordance with a compliance framework to be misleading if in accordance with ASA 210[16] the auditor determined that the framework is acceptable.[17]

Definition of a Related Party (Ref: Para. 10(b))

A4.             Many financial reporting frameworks discuss the concepts of control and significant influence.  Although they may discuss these concepts using different