Page 137 - CA Final PARAM Digital Book.

Part 6- SA 550

QNO Related Party (Sources) Old Course – (M06E, N08R, M11R, M12E, N12E, M14R,
82.000 TITANIUM CNO--SA550.060 N15E, PM17, N18M, M19M, N19E)

The training partner in your office is aware that you have covered SA 550 Related Parties in your
professional studies. He has asked you to help him prepare for a training session he is about to give.
Requirements
Prepare notes for a training session for junior staff on how to verify the existence of related party
transactions.
OR

In the course of audit of Q Ltd, its statutory auditor wants to be sure of the adequacy of related party
disclosures? Kindly guide the auditor in identifying the possible source of related party information.
OR
JY & Co is appointed as auditor of Breeze Ltd JY & Co seeks your guidance for reviewing the records and
documentation of the company regarding ‘related party transactions in the normal course of business’
Describe the steps to be followed
Answer Part I -- Relevant Standards & Laws
▪ SA 550, Related Parties

Part II -- Requirements of Relevant Standards & Laws
➢ Inspecting Records or Documents may indicate existence of related party relationships or
transactions which were not identified or Mgt didn’t disclose it to auditor.
During the audit, the auditor shall remain alert, when inspecting records or documents, for
arrangements or other information that may indicate the existence of related party relationships
or transactions that management has not previously identified or disclosed to the auditor.

➢ Compulsory to see following documents: -
• Legal, Bank, TP Confirmations / Minutes of Shareholders, TCWG / Such other
documents
In particular, the auditor shall inspect the following for indications of the existence of
related party relationships or transactions that management has not previously identified
or disclosed to the auditor:
• Bank (For guarantees / securities given or taken, arrangements such as minimum
balance setoff arrangement / joint holders / nominee) legal (Contracts / MOUs etc)
and third-party confirmations (From Directors / Subsidiaries) obtained as part of
the auditor’s procedures;
• Minutes of meetings of shareholders and of those charged with governance; and
(Approvals under Sec 177 & Sec 188)
• Such other records or documents as the auditor considers necessary in the
circumstances of the entity. (E.g. Company Restructuring Documents)

➢ Documents which can give information about related parties: -
• AS 18 / Schedule III disclosures of Previous Years (Old Records)
• Shareholders register (Control / SI)
• Director’s register (SI)
• Contracts with TCWG / Directors / KMP (SI)
• Life insurance policies (SI)
• Records of Entity’s pension plans (SI)
• Statements of Conflict of Interest (SI)
• Investment Register (Control / SI)

(Legal Documents)
• BOD / Shareholder Meeting Minutes
• Sec 189 Register
• Information supplied to Regulatory Authorities
• Filing with SEBI / SEC
• Tax Returns

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