AU-C Original Pronouncements
|Sources||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-C Section 550
AU-C Section 550.09 states that:
…the objectives of the auditor are to
- obtain an understanding of related-party relationships and transactions sufficient to be able to
- 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.
- conclude, based on the audit evidence obtained, whether the financial statements, insofar as they are affected by those relationships and transactions, achieve fair presentation.
- 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 Section ...