Wiley Practitioner's Guide to GAAS 2015: Covering all SASs, SSAEs, SSARSs, PCAOB Auditing Standards, and Interpretations

AU-C 550 Related Parties

AU-C ORIGINAL PRONOUNCEMENTS

Original Pronouncements

Statements on Accounting Standards (SASs) 122 and 128.

DEFINITIONS OF TERMS

Arm's-length transaction. A transaction conducted on such terms and conditions between a willing buyer and a willing seller who are unrelated and are acting independently of each other and pursuing their own best interests.

Related party. A party defined as a related party in GAAP.

OBJECTIVES OF AU SECTION 550

AU-C 550.09 states that:

… the objectives of the auditor are to

1. obtain an understanding of related-party relationships and transactions sufficient to be able to
   1. recognize fraud risk factors, if any, arising from related-party relationships and transactions that are relevant to the identification and assessment of the risks of material misstatement due to fraud.
   2. conclude, based on the audit evidence obtained, whether the financial statements, insofar as they are affected by those relationships and transactions, achieve fair presentation.
2. obtain sufficient appropriate audit evidence about whether related-party relationships and transactions have been appropriately identified, accounted for, and disclosed in the financial statements.

AU-C 550 is framework-neutral. It encompasses financial reporting frameworks in addition to US GAAP promulgated by the bodies designated by the Council of the AICPA, such as International Financial Reporting Standards, as well as special-purpose frameworks described in AU-C ...