Related Party transactions

Question 1

Is A identifies related parties not previously identified/disclosed they should- 5

Answer 1

Communicate that to E team

Request management identify all transactions with that RP & enquire why failed to identify them

Perform substantive Procedures

Reconsider risk other unidentified RPs may exist

Evaluate whether non disclosure my management appears intentional

Question 2

Even where Related Parties have been identified, difficult

to spot associated transactions with them because-3

Answer 2

D may be reluctant. To disclose (family member)

Nit easy to spot transactions in a/c system as Not seperately identified from normal transactions

May be concealed fraudulent purposes

Question 3

ISA 550

Related parties

Disclosure should be made of-3

Answer 3

Nature of RP relationship

Amount & bal o/s at year end of transaction

Any allowance doubtful receivables / expense recognised irrecoverable debt

Question 4

4 indicators of related party transactions

Answer 4

Transactions:

• with abnormal terms
• with logical business reason
• not processed in normal/routine way
• overly complex

Question 5

If auditor identifies Related party transactions they should-3

Answer 5

Obtain evidence appropriately authorised

Inspect contract to establish:

• terms
• whether appropriate disclosure made

Question 6

Related Party transactions

Risk assessment procedures

Answer 6

Obtain. Understanding of
-identify of RP & nature of RP relationship, purpose of transactions with them

• controls established by client to approve/authorise

Question 7

Related Parties

8 other procedures

Answer 7

Inspect:

Prior year working papers

Inspect shareholder records for details principal shareholder

Minutes of shareholder meetings

Income tax return
…………,
Enquire of other auditors involved in audit

Where not prohibited by law:
- confirm transactions with bank/law firm
- confirm terms with related party
Read FS for evidence of transaction