Document ID: chunk:federal_register_of_legislation:F2023C01132:reg:23:p15
Version: federal_register_of_legislation:F2023C01132
Segment Type: reg
Provision Reference: reg 23 (pt 15/23)
Character Range: 50287–53655

of transactions under specific terms and conditions.

           * The provision of designated services or financial support.

    Examples of arrangements that may indicate the existence of related party relationships or transactions that management has not previously identified or disclosed to the auditor include:

           * Participation in unincorporated partnerships with other parties.

           * Agreements for the provision of services to certain parties under terms and conditions that are outside the entity's normal course of business.

           * Guarantees and guarantor relationships.

Identification of Significant Transactions outside the Normal Course of Business (Ref: Para. 16)

A24.         Obtaining further information on significant transactions outside the entity's normal course of business enables the auditor to evaluate whether fraud risk factors, if any, are present and, where the applicable financial reporting framework establishes related party requirements, to identify the risks of material misstatement.

A25.         Examples of transactions outside the entity's normal course of business may include:

           * Complex equity transactions, such as corporate restructurings or acquisitions.

           * Transactions with offshore entities in jurisdictions with weak corporate laws.

           * The leasing of premises or the rendering of management services by the entity to another party if no consideration is exchanged.

           * Sales transactions with unusually large discounts or returns.

           * Transactions with circular arrangements, for example, sales with a commitment to repurchase.

           * Transactions under contracts whose terms are changed before expiry.

Understanding the nature of significant transactions outside the normal course of business (Ref: Para. 16(a))

A26.         Enquiring into the nature of the significant transactions outside the entity's normal course of business involves obtaining an understanding of the business rationale of the transactions, and the terms and conditions under which these have been entered into.

Enquiring into whether related parties could be involved (Ref: Para. 16(b))

A27.         A related party could be involved in a significant transaction outside the entity's normal course of business not only by directly influencing the transaction through being a party to the transaction, but also by indirectly influencing it through an intermediary.  Such influence may indicate the presence of a fraud risk factor.

Sharing Related Party Information with the Engagement Team (Ref: Para. 17)

A28.         Relevant related party information that may be shared among the engagement team members includes, for example:

           * The identity of the entity's related parties.

           * The nature of the related party relationships and transactions.

           * Significant or complex related party relationships or transactions that may be determined to be significant risks, in particular transactions in which management or those charged with governance are financially involved.

Identification and Assessment of the Risks of Material Misstatement Associated with Related Party Relationships and Transactions

Fraud Risk Factors Associated with a Related Party with Dominant Influence (Ref: Para. 19)

A29.         Domination