ISA 550 outlines the responsibilities the auditor has in ensuring that management has correctly identified related party transactions and made sufficient disclosure of such transactions within the financial statements. IAS 24 ‘Related Party Disclosures’ deals with the disclosure of such related party transactions. Under the provisions of IAS 24, a party is related to an entity if:

a. Directly, or indirectly through intermediaries, the party

i. controls, or is controlled by, or is under common control with, the entity,

ii. has an interest in the entity that gives it significant influence over the entity,

iii. has joint control over the entity;

b. the party is an associate;

c. the party is a joint venture;

d. the party is a member of the key management personnel of the entity or its parent;

e. the party is a close member of the family and any individual referred to in (a) or (d);

f. the party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e);

g. the party is a post-employment benefit plan of the entity, or of any entity that is a related party of the entity.

It is widely understood that many transactions within an entity are entered into with related parties and may not necessarily carry any more risk of material misstatement than any other unrelated transaction. ...

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