## SA 550: Documents to Identify Related Parties

During the audit, the auditor inspects records and documents that may provide information about related party relationships (RPR) and related party transactions (RPT).

### Mnemonic: SIR CIA ROL

Letter	Document	Purpose
S	Shareholder registers	Identify the entity's principal shareholders
I	Income tax returns	Entity's filed returns may reveal undisclosed relationships
R	Regulatory authority submissions	Information supplied by the entity to regulators
C	Conflicts of interest statements	Declarations from management and TCWG
I	Investment records	Entity's investments and those of its pension plans
A	Agreements with key management / TCWG	Contracts with those who govern the entity
R	Re-negotiated significant contracts	Contracts renegotiated during the period
O	Outside ordinary course contracts	Significant contracts NOT in the entity's ordinary business
L	Life insurance policies	Life insurance policies acquired by the entity

---

### Why These Documents Matter

Shareholder registers can reveal undisclosed controlling interests
Tax returns often disclose related-party income or payments not in the financial statements
Conflict of interest declarations are management's self-reported admissions
Out-of-ordinary contracts are a red flag — arms-length transactions rarely deviate from normal business
Re-negotiated contracts during the period may indicate pressure from a related party

Worked example

### Example 1

Example — Using Shareholder Register: During audit of Horizon Ltd, the auditor checks the shareholder register and finds that the CFO's spouse holds 18% equity. This was not disclosed in the related party note. This discovery requires the auditor to investigate all transactions between Horizon Ltd and the CFO's spouse.

### Example 2

Example — Life Insurance Policy: The auditor notices the entity took a keyman life insurance policy on a director who is also a major supplier. This signals a close financial interdependency — the supplier-director relationship should be examined as a potential undisclosed related party arrangement.

### Example 3

Example — Re-negotiated Contract: During the period, a long-standing supplier contract was re-negotiated to double the purchase price without a market comparison. The auditor identifies this as suspicious and traces the supplier — finding it is a company controlled by a relative of the Managing Director.

⚠️ Common exam mistakes

Relying only on management's declaration of related parties — documents must independently corroborate.
Ignoring pension plan investment records — these can conceal indirect related-party ownership.
Not examining contracts 'outside ordinary course of business' — these are the highest-risk documents for undisclosed RPTs.
Forgetting re-negotiated contracts as a source — changes in contract terms during the period are a significant indicator.

Reference:

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Documents to Identify Related Parties (SIR CIA ROL)

Worked example

⚠️ Common exam mistakes