Wiley Practitioner's Guide to GAAS 2020

22AU-C 550 Related Parties

Scope

Definitions of Terms

Objective of AU-C Section 550

Overview

Requirements

Accounting Considerations

Audit Procedures

Written Representations

AU-C 550 Illustration—Related-Party Checklist

SCOPE

AU-C 550 applies to all audits of financial statements and requires that auditors evaluate related party relationships and transactions and their effect on risks of material misstatements. This Section also requires that the auditor evaluate whether related-party disclosures beyond those required by the specialized framework are necessary. (AU-C 550.01 and .02)

DEFINITIONS OF TERMS

Source AU-C 550.10. For definitions related to this standard, see Appendix A, “Definitions of Terms”: Arm’s-length transaction, Related party.

OBJECTIVES OF AU-C SECTION 550

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 ...