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Atul Mudgal asked 1 year ago

 SA 550 operates in a sphere of related parties relationship and RPT. 
a.  Only 7 type of Transactions which are specifically covered in section 188 are relevant while performing the audit procedure to verify the related party transactions and to identify the relationship auditor has to consider  AS -18. On combined reading of AS 18 and section 188, auditor is required  to refer AS18 and section 188 to verify the sanctity of related party and transaction ? 
b.  Any other transaction, other than those specified in section 188, are not considered while performing audit procedure since the transaction in itself do not fall in the ambit of          section 188 of companies act 2013?
Once the transaction is not expressly covered then consideration of AS 18 is extraneous in regard to the RPT and therefore there will be no application of SA 550 ?

1 Answers
RaviRavi Staff answered 1 year ago

Sec 2(76) — Defines related parties as per company’s act
Sec 177 & Sec 188 — Explains what kind of permissions are required if company wants to enter into related party relationships.
AS-18 — Explains us who are our related parties. What kind of relation we have with them. & How to disclose them in notes to accounts.
For accounting and disclosure purpose content in AS is relevant and not company’s act. Content of company’s act is relevant only for taking permissions, maintaining statutory records.  
SA 550– Explains who to identify risky related party relations & transactions, where misstatement can arise in financial statements. Then how to perform audit procedures, collect evidence regarding related party disclosures in financial statements.
 So
AS 18 — talks about accounting treatment
SA 550– How to audit it. We check compliance of law along with that & also use information maintained in statutory records. But that doesn’t mean only 188 will define our scope of checking, it will be a very narrow interpretation

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