related party

7/28/2019 related party

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URUSNIAGA ANTARA PIHAKBERKAITAN

K3IAS 24/MASB 8 ISA 550


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DEFINATION OF RELATED PARTY

Parties are considered to be related if

one party has the ability to control the

other party or exercise significant

influence over the other party, to the

extent that it prevents the other party

from fully pursuing its own separate

interest, in making financial and

operating decisions.


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EXAMPLES OF RELATED PARTIES

Jointly controlled organization

Majority ownerships or power to vote

Key management personal in any entity

Subsidiary, associated or parent companies

Other parties with the power to interfere

the management from taking actions.


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DEFINISI

RELATED PARTY TRANSACTIONS:

A transfer of resources or obligations between

related parties, regardless of whether a price

is charged.


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ISA 550 onRELATED PARTIES

Auditor should perform audit procedures

designed to obtain sufficient appropriate audit

evidence regarding the identification anddisclosure by management ofrelated parties and

the effect of related party transaction and the

effect of related party transactions that arematerial to the financial statements


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RESPONSIBILITY OF AUDITORS

Perform audit procedures

Obtain sufficient appropriate audit evidence

Objective:

Identify related parties Disclosure of related parties

Disclosure of related parties transactions

Responsibility of management: Recording and disclosures in financial statement.


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THE NEED TO KNOW RELATED

PARTY INFORMATION

Disclosures in the financial statements

effects on the financial statements.

Auditors' assessment of the reliability ofevidence.

Motivation of transactions other

than business considerations.


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IMPLICATIONS OF RELATED PARTYTRANSACTIONS

Related party transactions are valid.

They create transactions that benefit one party in

terms of profits or cost savings It does not reflect a true and fair view of the

financial statements as compared to if the

transactions take place with outside parties.

The transactions require adequate disclosures

The judgments are important for the minority

interests.


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RELATED PARTY TRANSACTIONS

For public listed companies & subsidiaries -

Enterprises are considered to have RPT: Directly or indirectly (through intermediaries)

control, are controlled by, or under commoncontrol with the reporting enterprise.

Directly or indirectly (through intermediaries)exercise significant influence over or are subjectto significant influence by with the reportingenterprise.

Controlled by the same enterprise which exercisesignificant influence over the reporting enterprise.


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Continued

Subject to significant influence by the sameenterprise which exercise significant influenceover the reporting enterprise.

Individuals owning voting power.

Key management personnel responsible forplanning, directing & controlling activities.

Substantial interest in voting power is ownedby individual or key mgt.

Pension/provident funds for employees.


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Kewujudan UPB

1. Pinjam meminjam pada kadar lebih tinggi /rendah dari pasaran

2. Belian/jualan aset pada harga sangat berbeza

dari biasa (unusual prices)3. Pertukaran aset secara langsung

4. Pemberian pinjaman tanpa syarat jadualbayaran tertentu dengan sedikit atau tanpa

sekuriti.5. Urusniaga Jaminan


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6. Kewujudan urusniaga yang tidak mempunyai

asas (no apparent logical business reason foroccurrence).

7. Urusniaga substance differs from form.

8. Urusniaga di proses secara luarbiasa.

9. Urusniaga/volum yang tinggi dengan

pelanggan/pembekal tertentu berbanding

dengan pihak lain.

10. Urusniaga tak direkodreceipt or provision ofmgt services at no charge.


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Kepastian Kewujudan UPB

Menilai prosedur syarikat berkaitan UPB, jika ada.

Pertanyaan akan senarai pihak terlibat UPB.

Semak senarai pengarah yang berkhidmat dalamsyarikat lain.

Senarai dana pencen yang berkaitan danpengurusannya.

Semak daftar senarai pemegang saham besar(>20%) & kuasa mengundi besar

Review pelaburan besar yang mungkinmewujudkan UPB


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TRANSACTIONS WITH RELATED

PARTIES Auditor to review information provided by

directors and mgt identifying related party

transactions.

Be alert for other material related party

transactions.

Accounting & Internal Control System toconsider the adequacy of control procedures

over the authorization and recording of

related party transactions.


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AUDIT PROCEDURESEXISTENCE & DISCLOSURE OF RELATED PARTIES

Auditor to review info provided by directors & mgt

identifying names of all known RP and should

perform the following procedures in respect of the

completeness of this info:

a) Review prior years working papers for names of known

RP

b) Review the cos procedures for identification of RP

c) Inquire as to the affiliation of directors and officers with

other cos.


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d) Review shareholders records to determine the names ofprincipal shareholders or, if appropriate, obtain a listing

of principal shareholders and the board of directorsfrom the share register.

e) Review minutes of the meetings of shareholders andthe board of directors and other relevant statutoryrecords such as the register of directors interests.

f) Inquire of other auditors currently involved in the audit,or predecessor auditors, as to their knowledge ofadditional related parties.

g) Review the entitys income tax returns and other

information supplied to regulatory agencies.h) Ensure adequate disclosure as required by the standards


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TRANSACTIONS WITH

RELATED PARTIS

Review of information from management -

identify RPT & material RPT

Consider adequacy of ICQ procedures for

authorization & recording of RPT.

Unusual transactions & indication of the

existence of previously unidentified RP

Procedures to identify the existence oftransactions


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EXAMINATION OF RP TRANSACTIONS

Evidence that transactions have beenrecorded

Additional procedures: Confirmation with RP

Inspection of evidence with RP Confirmation from associated parties.

Management representations -completeness & adequate RP disclosures

Modify audit report if auditors unablesufficient appropriate audit evidence &inadequate disclosures.


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DISCLOSURES

Regulations for disclosures of certain categories of RP. MASB 1 - amounts payable to and receivable from parent

enterprise, fellow subsidiaries and associates, other related parties.

MASB 11 -& MASB 12 - list of significant subsidiaries &associates

MS AB 3 - extraordinary items & items of income & expensewithin P+L from ordinary activities with such size, nature orincidence - that is relevant to explain the performance.

Disclosure of RPT where control exists regardless of the existence oftransactions.

RPT with transactions - disclose the nature of RPT, identities of RP,types & elements of transactions

Disclosures in aggregate - if understanding the effects is notnecessary.


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If, in the auditors judgment, the risk ofsignificant related parties remaining

undetected is low, these procedures may

be modified as appropriate. Auditor must be satisfied that disclosures

are adequate.


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NO DISCLOSURES OF TRANSACTIONS

In:

Consolidated financial statements for intra-grouptransactions.

Parent financial statements published with theconsolidated financial statements.

Financial statements of a wholly-ownedsubsidiaries.

Financial statements of state controlledenterprises.


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RELATED PARTY ISSUES

Related party relationships (RPT) are a normal feature

RPT affects the financial position and operating results - by the type oramount of transaction

RPR affects the financial position even without RPT

Effects of influence which do not lead to RPT is difficult to determine,

hence disclosure of such effects is not required A price agreed between parties & flexibility in price-setting process.

Existence of a variety of methods.

The comparable uncontrolled price method.

The resale price method is used for goods transferred before sale toindependent parties.

If RPT price is not determined - disclosures in financial statements is stillnecessary.

Transactions that would not have taken place if the relationships does notexist.

related party

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