Related Parties
Related Parties
Related Parties
1. Management is responsible for the identification and disclosure of related parties and
2. The auditor should perform audit procedures designed to obtain sufficient appropriate audit
evidence regarding the identification and disclosure by management of related parties and the
effect of related party transactions that are material to the financial statements. However, an
3. The auditor needs to have a sufficient understanding of the entity and its environment to enable
identification of the events, transactions and practices that may result in a risk of material
4. When obtaining an understanding of the entity’s internal control, the auditor should consider
the adequacy of control activities over the authorization and recording of related party
transactions.
5. In examining the identified related party transactions, the auditor should obtain sufficient
appropriate audit evidence as to whether these transactions have been properly recorded and
disclosed.
parties; and
7. The auditor is unable to obtain sufficient appropriate audit evidence concerning related parties
and transactions with such parties or concludes that their disclosure in the financial statements
is not adequate; the auditor should modify the audit report appropriately.
PSA 610
1. The external auditor should obtain a sufficient understanding of internal audit activities to
identify and assess the risks of material misstatement of the financial statements and to design
2. The external auditor should perform an assessment of the internal audit function when internal
auditing is relevant to the external auditor’s risk assessment.
3. When obtaining an understanding and performing a preliminary assessment of the internal audit
a. Organizational status
c. Technical competence
4. When planning to use the work of internal auditing, the external auditor will need to consider
internal auditing’s tentative plan for the period and discuss it as early a stage as possible.
5. Where the work of internal auditing is to be a factor in determining the nature, timing and
extent of the external auditor’s procedures, it is desirable to agree in advance the timing of such
work, the extent of audit coverage, materiality levels and proposed methods of sample
selection, documentation of the work performed and review and reporting procedures.
6. A liaison with internal auditing is more effective when meetings are held at appropriate intervals
7. When the external auditor intends to use specific work of internal auditing, the external auditor
should evaluate and perform audit procedures on that work to confirm its adequacy for the
8. The evaluation of specific work of internal auditing involves consideration of the adequacy of the
scope of the work and related programs and whether the preliminary assessment of the internal
149. The nature, timing and extent of audit procedures performed on the specific work of internal
area concerned;
10. The external auditor would record conclusions regarding the specific internal auditing work that
has been evaluated and the audit procedures performed on the internal auditor’s work