Document ID: chunk:federal_register_of_legislation:F2020L00252:body:0:p45
Version: federal_register_of_legislation:F2020L00252
Segment Type: other
Provision Reference: 
Character Range: 125792–128933

management override of relevant controls.

185.           Existing paragraph A12 is amended to read as follows:

However, where the framework does not establish related party requirements, the entity may not have such information systems in place.  Under such circumstances, it is possible that management may not be aware of the existence of all related parties.  Nevertheless, the requirement to make the enquiries specified by paragraph 13 still applies because management may be aware of parties that meet the related party definition set out in this ASA.  In such a case, however, the auditor's enquiries regarding the identity of the entity's related parties are likely to form part of the auditor's risk assessment procedures and related activities performed in accordance with ASA 315to obtain information regarding the entity's organisational structure, ownership, governance and business model.:

           * The entity's ownership and governance structures;

           * The types of investments that the entity is making and plans to make; and

           * The way the entity is structured and how it is financed.

…

186.           Existing footnote 21 in paragraph A17 is amended to read as follows:

See ASA 315, paragraph 1421.

187.           Existing paragraph A20 is amended to read as follows:

Controls activities in smaller entities are likely to be less formal and smaller entities may have no documented processes for dealing with related party relationships and transactions.  An owner-manager may mitigate some of the risks arising from related party transactions, or potentially increase those risks, through active involvement in all the main aspects of the transactions.  For such entities, the auditor may obtain an understanding of the related party relationships and transactions, and any controls that may exist over these, through enquiry of management combined with other procedures, such as observation of management's oversight and review activities, and inspection of available relevant documentation.

188.           Existing paragraph A28 is amended to read as follows:

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 require special audit consideration, in particular transactions in which management or those charged with governance are financially involved.

189.           Existing paragraph A34 is amended to read as follows:

Depending upon the results of the auditor's risk assessment procedures, the auditor may consider it appropriate to obtain audit evidence without testing the entity's controls over related party relationships and transactions.  In some circumstances, however, it may not be possible to obtain sufficient appropriate audit evidence from substantive audit procedures alone in relation to the risks of material misstatement associated with related party