Document ID: chunk:federal_register_of_legislation:F2023C01132:reg:23:p18
Version: federal_register_of_legislation:F2023C01132
Segment Type: reg
Provision Reference: reg 23 (pt 18/23)
Character Range: 59144–62571

relationships and transactions.

Identification of Previously Unidentified or Undisclosed Related Parties or Significant Related Party Transactions

Existence of Related Parties (Ref: Para. 21)

Aus A34.1 In determining whether underlying circumstances confirm the existence of related party relationships or transactions, the auditor may consider the Australian Accounting Standards, including consideration of the substance of the relationship and/or transaction and not merely the legal form.

Communicating Newly Identified Related Party Information to the Engagement Team (Ref: Para. 22(a))

A35.         Communicating promptly any newly identified related parties to the other members of the engagement team assists them in determining whether this information affects the results of, and conclusions drawn from, risk assessment procedures already performed, including whether the risks of material misstatement need to be reassessed.

Substantive Procedures Relating to Newly Identified Related Parties or Significant Related Party Transactions (Ref: Para. 22(c))

A36.         Examples of substantive audit procedures that the auditor may perform relating to newly identified related parties or significant related party transactions include:

           * Making enquiries regarding the nature of the entity's relationships with the newly identified related parties, including (where appropriate and not prohibited by law, regulation or ethical rules) enquiring of parties outside the entity who are presumed to have significant knowledge of the entity and its business, such as legal counsel, principal agents, major representatives, consultants, guarantors, or other close business partners.

           * Conducting an analysis of accounting records for transactions with the newly identified related parties.  Such an analysis may be facilitated using computer‑assisted audit techniques.

           * Verifying the terms and conditions of the newly identified related party transactions, and evaluating whether the transactions have been appropriately accounted for and disclosed in accordance with the applicable financial reporting framework.

Intentional Non‑Disclosure by Management (Ref: Para. 22(e))

A37.         The requirements and guidance in ASA 240 regarding the auditor's responsibilities relating to fraud in an audit of a financial report are relevant where management appears to have intentionally failed to disclose related parties or significant related party transactions to the auditor.  The auditor may also consider whether it is necessary to re‑evaluate the reliability of management's responses to the auditor's enquiries and management's representations to the auditor.

Identified Significant Related Party Transactions outside the Entity's Normal Course of Business

Evaluating the Business Rationale of Significant Related Party Transactions (Ref: Para. 23(a))

A38.         In evaluating the business rationale of a significant related party transaction outside the entity's normal course of business, the auditor may consider the following:

           * Whether the transaction:

                   + Is overly complex (for example, it may involve multiple related parties within a group).

                   + Has unusual terms of trade, such as unusual prices, interest rates, guarantees and repayment terms.

                   + Lacks an apparent logical business reason for