A board within the International Federation of Accountants is seeking comment on its exposure draft that addresses what auditors should consider when dealing with related parties and related-party transactions.
The International Auditing and Assurance Standards Board said that it decided to review the auditing standard, ISA 550, “Related Parties,” after a number of related parties were involved in major corporate scandals. Following earlier consultations, the board decided to re-expose its proposal because of the significance of the changes made in response to the consultations.
The goal of the project is to enhance the auditor's consideration of related parties and related party transactions in audits, establishing an approach that requires the auditor to assess the risks of misstatement and direct audit work accordingly. The proposals in the re-exposure draft are intended to make the auditor's responsibilities clearer, distinguishing cases where the accounting framework includes disclosure and other reporting requirements, and those where it includes no, or inadequate, requirements.
The exposure draft includes a new definition of a "related party" and improves the delineation between the auditor's procedures to identify relevant risks of material misstatement and responses to the assessed risks.
The board is also seeking comments on its proposed ISA 570, “Going Concern,” which has been redrafted in the federation’s new style.
Comments on the related parties standard are due by June 30, while comments on the redrafted going concern guidance are due by May 31. Both drafts may be viewed at www.ifac.org/EDs.
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