Document ID: chunk:federal_register_of_legislation:F2023C01132:reg:23:p6
Version: federal_register_of_legislation:F2023C01132
Segment Type: reg
Provision Reference: reg 23 (pt 6/23)
Character Range: 23173–26615

relating to the existence of a related party with dominant influence) when performing the risk assessment procedures and related activities in connection with related parties, the auditor shall consider such information when identifying and assessing the risks of material misstatement due to fraud in accordance with ASA 240.  (Ref: Para. A6 and A29‑A30)

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

20.               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

21.               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)

22.               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:

(a)                Promptly communicate the relevant information to the other members of the engagement team;  (Ref: Para. A35)

(b)                Where the applicable financial reporting framework establishes related party requirements:

(i)                 Request management to identify all transactions with the newly identified related parties for the auditor's further evaluation; and

(ii)               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;

(c)                Perform appropriate substantive audit procedures relating to such newly identified related parties or significant related party transactions;  (Ref: Para. A36)

(d)                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

(e)                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

23.               For identified significant related party transactions outside the entity's normal course of business, the auditor shall:

(a)                Inspect the underlying contracts or agreements, if any, and evaluate whether:

(i)                 The business rationale (or lack thereof) of the transactions suggests that they may have been entered into to engage in fraudulent financial reporting or to conceal misappropriation of assets;[11]  (Ref: Para. A38‑A39)

(ii)               The