You are the audit manager on Highland Ltd, a property investment company owned by a

small number of wealthy investors. Last year the owners brought in new managers, who

made substantial changes to the organisational structure of Highland. The new management

team acquired a substantial parcel of shares in Highland and has also implemented a bold

acquisitions strategy, resulting in a number of new business interests across the

Asia-Pacific region.

A new staff member of the finance team, Kirsten Roberts, has been given responsibility for

liaising with the auditor in respect of related-party transactions. Kirsten is responsible for

identifying, recording, summarising and disclosing related-party transactions. This responsibility,

along with a long list of other accounting responsibilities, has been delegated to her by the new

management team. Kirsten has given you a list of related-party transactions that has not

changed from previous years. However, given the changes in the business and the new

acquisitions, you believe there is a risk of unidentified related parties. You meet with Kirsten to

discuss this and soon realise that Kirsten does not really know much about the related-party

framework in AASB 124 (IAS 24). Kirsten informs you of the following information:

Highland provides management services to a company in Fiji called Sunshine.

However, no invoice has yet been processed and Kirsten is unaware of the terms of

the arrangement. It is Kirsten's understanding that Sunshine is owned by members of

the new management team.

During the year Highland sold a property located in Singapore to a company called

Clayton, which was set up specifically for the purpose of buying this particular

property. Kirsten indicates that Clayton is not related to Highland, as Clayton is

owned 100 per cent by a Singaporean bank. However, Kirsten does not understand

why there are still property management fees for this property in Highland's accounts

relating to the period after the property was sold.

Since the new management team has come on board, Highland has done a lot of

business with a company called Diamond, in which one of the directors of Highland

has a substantial interest. Kirsten tells you that all transactions with Diamond are on

normal commercial terms, so she has not included Diamond on her list of related

parties.

REQUIRED

Based on the information given, list three factors that would increase the risk of a material

misstatement occurring due to fraud or error resulting from the entity's related parties or

transactions.