What is a related party in auditing?
2410 (AS 2410), Related Parties, requires auditors of public companies to pay special attention to financial statement matters that pose increased risks of fraud. Specifically, auditors must focus on three critical areas: Related-party transactions, such as those involving directors, executives and their family members.
What must the auditor do regarding related parties?
The auditor should communicate to engagement team members relevant information about related parties, including the names of the related parties and the nature of the company’s relationships and transactions with those related parties.
Which related party transaction is not required by audit committee?
The following transactions are exception to related party transactions: Transactions undertaken in ordinary course of business. Transactions arising out of restructuring, mergers or acquisition. Transactions entered between holding and its wholly owned subsidiary company duly approved by shareholders.
What are considered related party transactions in preparing audit financial statements?
Examples of related parties are affiliates, other subsidiaries under common control, owners of the business, its managers, and their families, the parent entity, and trusts for the benefit of employees.
What are the auditor’s responsibilities for related parties and related party transactions?
Identifying and disclosing parties and transactions under accounting requirements; Authorising and approving significant transactions and arrangements with related parties and. Authorising significant transactions outside the entity’s normal course of business.
What are the common types of transactions that can be conducted between related parties?
The most common types of related parties are business affiliates, shareholder groups, subsidiaries, and minority-owned companies. Related-party transactions can include sales, leases, service agreements, and loan agreements. As mentioned above, these types of transactions are not necessarily illegal.
Is audit committee approval required for related party transactions?
It may be noted that Audit Committee approval will not be required for transactions entered into between a holding company and its wholly-owned subsidiary company other than for transactions referred to in section 188.
Which related party transaction is not required by Audit Committee?