Appendix No. 23

to the Order of the Ministry of Finance of the Russian Federation of January 9, 2019 No. 2n

International standard of audit 550 "The related parties"

The International Standard of Audit (ISA) 550 "Related parties" should be considered together with MCA 200 "Main objectives of the independent auditor and carrying out audit according to International standards of audit".

Introduction

Scope of this standard

1. This International Standard of Audit (ISA) establishes the auditor's obligations in connection with relations and transactions between the related parties during financial records audit. In particular, it contains the detailed description of procedure for application of MCA 315 (reviewed) <1>, MSA 330 <2> and MSA 240 <3> to risks of essential misstatement of the financial reporting in connection with relations and transactions between the related parties.

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<1> MCA 315 (reviewed) "Identification and risks assessment of essential misstatement by means of studying of the organization and its environment".

<2> MCA 330 "Audit procedures in response to the estimated risks".

<3> MCA 240 "The auditor's obligations concerning unfair actions when carrying out financial records audit".

Nature of relations and transactions between the related parties

2. Many transactions between the related parties are made during regular economic activity. In similar circumstances they can be integrated to risks of essential misstatement of the financial reporting, higher, than risks of making of similar transactions between the untied parties. At the same time in some cases nature of relations and transactions between the related parties can cause emergence of higher risks of essential misstatement of the financial reporting, than risks of making of transactions between the untied parties. For example:

- the related parties can be effective by means of the most various and combined relations and structures that leads to complication of transactions between them;

- information systems can be inefficient regarding identification or generalization of transactions and outstanding balances between the organization and its related parties;

- transactions between the related parties can be made on the conditions other than standard market conditions; for example, some such transactions can not provide counter provision.

Auditor's obligations

3. As the related parties are not independent from each other, many concepts of preparation of the financial reporting provide certain requirements for conducting financial accounting and disclosure of information regarding relations, transactions between the related parties and account balances that users of the financial reporting could constitute idea of their nature, and also of their actual or possible influence on the financial reporting. If similar requirements are established by the applicable concept of preparation of the financial reporting, then the auditor shall carry out audit procedures for identification, assessment and development of response measures on the risks of essential misstatement arising in connection with inadequate conducting financial accounting by the organization or inadequate disclosure by it of information on relations, transactions between the related parties and account balances in defiance of the requirements provided by such concept.

4. Even if the applicable concept of preparation of the financial reporting contains the minimum requirements or does not contain requirements to the related parties at all, the auditor anyway shall gain impression about relations and transactions of the organization with the related parties in the degree sufficient for forming of conclusion about, whether really financial reporting if such relations and transactions (see Item A 1) affect its content:

(a) provides fair presentation - for concepts of fair presentation (see Item A 2);

(b) does not mislead - for concepts of compliance (see Item A 3).

5. Besides, the understanding of relations and transactions of the organization with the related parties is necessary for assessment by the auditor of availability of one or more risk factors of unfair actions according to MCA 240 <4> as it is simpler to make unfair actions by means of involvement of the related parties.

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<4> MSA 240, Item 24.

6. Owing to the integral restrictions inherent in audit, there is inevitable risk that some essential misstatements of the financial reporting can be not revealed even in spite of the fact that audit was carefully planned and carried out according to MCA <5>. In situation with the related parties possible influence of restrictions for capability of the auditor inherent in audit to reveal essential misstatements is more essential for the reasons stated below:

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<5> MCA 200 "Main objectives of the independent auditor and carrying out audit according to International standards of audit", the Items A53 - A54.

- the management can be not informed on existence of all relations and transactions between the related parties, especially if the applicable concept of preparation of the financial reporting does not contain requirements to the related parties;

- relations between the related parties can be integrated to higher probability of collusion, concealment of information or frauds from management.

7. Considering risk of not disclosure of information on relations and transactions between the related parties, it is in this situation especially important to plan and book audit with the known share of professional scepticism as that is required by MCA 200 <6>. Requirements of this MSA are directed to rendering to the auditor assistance in identification and risks assessment of essential misstatement in connection with relations and transactions between the related parties, and also in development of audit procedures in response to the estimated risks.

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<6> MSA 200, Item 15.

The effective date

8. This standard becomes effective concerning financial records audit for the periods beginning on December 15, 2009 or after this date.

Purposes

9. The purpose of the auditor consists in that:

(a) irrespective of whether are provided by the applicable concept of preparation of the financial reporting of the requirement to the related parties, to gain impression about relations and transactions between the related parties, sufficient:

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