Related Parties

RELATED PARTIES
1. Management is responsible for the identification and disclosure of related parties and
transactions with such parties.
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
audit cannot be expected to detect all related party transactions.
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
misstatement regarding related parties and transactions with such parties.
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.
6. The auditor should obtain a written representation from management concerning:
a. The completeness of information provided regarding the identification of related
parties; and
b. The adequacy of related party disclosures in the financial statements
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
CONSIDERING THE WORK OF INTERNAL AUDIT
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
and perform further audit procedures.
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
function, the important criteria are:
a. Organizational status
b. Scope of the function
c. Technical competence
d. Due professional care
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
during the period.
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
external auditor’s purposes.
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
auditing remains appropriate.
149. The nature, timing and extent of audit procedures performed on the specific work of internal
auditing will depend on:
● The external auditor’s judgment as to the risk of material misstatement of the
area concerned;
● The assessment of internal auditing; and
● The evaluation of the specific work by internal auditing.
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

Related Parties

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RELATED PARTIES

transactions with such parties.

audit cannot be expected to detect all related party transactions.

misstatement regarding related parties and transactions with such parties.

6. The auditor should obtain a written representation from management concerning:

a. The completeness of information provided regarding the identification of related

b. The adequacy of related party disclosures in the financial statements

CONSIDERING THE WORK OF INTERNAL AUDIT

and perform further audit procedures.

function, the important criteria are:

b. Scope of the function

d. Due professional care

during the period.

external auditor’s purposes.

auditing remains appropriate.

auditing will depend on:

● The external auditor’s judgment as to the risk of material misstatement of the

● The assessment of internal auditing; and

● The evaluation of the specific work by internal auditing.

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