Considerations on ISA 550 Applying, Related Parties
Author:
Lisa WEAVER
JEL:
D 04, M 41
DOI:
Keywords:
risk based approach, related parties, income tax returns, shareholder
Abstract:
This article explores the objectives and requirements of clarified ISA 550, Related Parties. The standard has been revised and redrafted by the International Auditing and Assurance Standards Board, and is now broadly consistent with other ISAs in that a risk-based approach to the audit of related parties is adopted. This is often a challenging area, with a high risk of material misstatement, frequently leading to the identification of fraud risk indicators. Gaining an understanding the requirements of ISA 550 is essential for all auditors.\r\nISA 550 focuses the auditor`s attention on the risk of material misstatement that may arise due to the existence of related-party relationships and transactions. The standard emphasizes the importance of considering these matters during planning and especially as part of risk assessment. There are some specific procedural requirements, and audit firms may need to review current practice to ensure that these requirements are met. Ultimately, ISA 550 provides clear guidance on the audit of this potentially challenging and extremely important area.\r\n