PQR Ltd. is engaged in the business of construction and real estate having various projects across the states. M/s ST & Co., Chartered…
CA Final · Advanced Auditing, Assurance and Professional Ethics · PYQS · November 2024
PQR Ltd. is engaged in the business of construction and real estate having various projects across the states. M/s ST & Co., Chartered Accountants have been appointed as statutory auditors. CA T, an engagement partner, who leads engagement team, during preliminary verification, identified a few agreements entered by PQR Ltd. for the provision of services to some parties under terms and conditions that are outside PQR Ltd.'s normal course of business, suggestive of the indications about existence of related party transactions that management has not previously disclosed to the auditor. Highlight the aspects that M/s ST & Co., shall consider on identification of previously undisclosed related party transactions with reference to the relevant standard on auditing.
Suggested Answer and Working Notes:
As per SA 550, "Related Parties," M/s ST & Co. should take the following steps upon identifying previously undisclosed related party transactions: Verify whether the circumstances substantiate the existence of such transactions.Ensure timely communication of the relevant information to all members of the engagement team.Confirm that appropriate substantive audit procedures have been conducted.Inquire why the entity's controls failed to identify or disclose the related party relationships or transactions.Carry out substantive audit procedures specifically for these newly identified related parties or significant related party transactions.Reassess risks associated with other related parties.Request management to identify all transactions involving the newly identified related parties.If it appears that management intentionally did not disclose such transactions, evaluate the implications for the audit.
Topics: Standard on Auditing (SA)
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