Document ID: chunk:federal_register_of_legislation:F2023C01132:reg:23:p9
Version: federal_register_of_legislation:F2023C01132
Segment Type: reg
Provision Reference: reg 23 (pt 9/23)
Character Range: 32217–35430

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 terms, they generally explain that:

(a)                Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities; and

(b)                Significant influence (which may be gained by share ownership, statute or agreement) is the power to participate in the financial and operating policy decisions of an entity, but is not control over those policies.

A5.             The existence of the following relationships may indicate the presence of control or significant influence:

(a)                Direct or indirect equity holdings or other financial interests in the entity.

(b)                The entity's holdings of direct or indirect equity or other financial interests in other entities.

(c)                Being part of those charged with governance or key management (that is, those members of management who have the authority and responsibility for planning, directing and controlling the activities of the entity).

(d)                Being a close family member of any person referred to in subparagraph (c).

(e)                Having a significant business relationship with any person referred to in subparagraph (c).

Related Parties with Dominant Influence (Ref: Para. 19)

A6.             Related parties, by virtue of their ability to exert control or significant influence, may be in a position to exert dominant influence over the entity or its management.  Consideration of such behaviour is relevant when identifying and assessing the risks of material misstatement due to fraud, as further explained in paragraphs A29‑A30.

Special‑Purpose Entities as Related Parties

A7.             In some circumstances, a special‑purpose entity[18] may be a related party of the entity because the entity may in substance control it, even if the entity owns little or none of the special‑purpose entity's equity.

Risk Assessment Procedures and Related Activities

Risks of Material Misstatement Associated with Related Party Relationships and Transactions (Ref: Para. 11)

Considerations Specific to Public Sector Entities

A8.             The public sector auditor's responsibilities regarding related party relationships and transactions may be affected by the audit mandate, or by obligations on public sector entities arising from law, regulation or other authority.  Consequently, the public sector auditor's responsibilities may not be limited to addressing the risks of material misstatement associated with related party relationships and transactions, but may also include a broader responsibility to address the risks of non‑compliance with law, regulation and other authority governing public sector bodies that lay down specific requirements in the conduct of business with related parties.  Further, the public sector auditor may need to have regard to public sector financial reporting requirements for related party