AUD 3 Internal Control 15 - 4 Service Organizations Flashcards
Service Organizations
Many companies use various types of service bureaus to assist them with the processing of routine transactions.
Certain transactions, like payroll, may require a particular expertise and can often be processed more efficiently by an entity that specializes in that type of transaction. One of the most common types of service bureaus processes the payroll of various customer entities.
Service Organizations
Many companies use various types of service bureaus to assist them with the processing of routine transactions.
Certain transactions, like payroll, may require a particular expertise and can often be processed more efficiently by an entity that specializes in that type of transaction. One of the most common types of service bureaus processes the payroll of various customer entities.
When an entity uses one of these service bureaus, also referred to as service organizations, AU-C section 402, Audit Considerations Relating to an Entity Using a Service Organization, provides guidance as to the impact on an audit.
It defines a service organization as “an organization or segment of an organization that provides services to user entities that are relevant to those user entities’ internal control over financial reporting.”
The objective of the “user auditor” (the auditor of the client using the services of the service organization), are to obtain an understanding of the nature and significance of the services provided, and evaluate their effect on the user entity’s internal control in order to assess the risks of material misstatement, and to design and perform audit procedures responsive to those risks.
Since the auditor is not in a position to examine the activities of such an outside organization, they will often need to rely on reports of the auditor of the service organization itself, referred to as the service auditor.
The service auditor will usually issue a report on the internal control structure that the user auditor may consider in assessing the internal control structure of the client.
The report on internal control structure by the service organization’s auditor will describe the services of the organization that are covered by the report and a description of the auditor’s procedures.
This will enable the auditor of one of the service organization’s customers to understand the overall impact of the service organization’s work on the internal control structure of the customer.
Before relying on such a report, the auditor should be satisfied as to the competence and independence of the service auditor, and the adequacy of the standards under which the report was issued.
The report of the service organization’s auditor will assist the customer’s auditor in gaining an understanding of the internal control structure of the customer, to the extent it depends on the service organization’s work.
This will not, however, be considered a basis for determining the effectiveness of the customer’s internal control structure, so the use of the report is not a division of responsibility.
As a result, there must be no reference to the auditor of the service organization in the audit report on the financial statements of the customer.
Service Organizations
When an entity uses one of these service bureaus, also referred to as service organizations, AU-C section 402, Audit Considerations Relating to an Entity Using a Service Organization, provides guidance as to the impact on an audit.
It defines a service organization as “an organization or segment of an organization that provides services to user entities that are relevant to those user entities’ internal control over financial reporting.”
Service Organizations
Many companies use various types of service bureaus to assist them with the processing of routine transactions.
Certain transactions, like payroll, may require a particular expertise and can often be processed more efficiently by an entity that specializes in that type of transaction. One of the most common types of service bureaus processes the payroll of various customer entities.
When an entity uses one of these service bureaus, also referred to as service organizations, AU-C section 402, Audit Considerations Relating to an Entity Using a Service Organization, provides guidance as to the impact on an audit.
It defines a service organization as “an organization or segment of an organization that provides services to user entities that are relevant to those user entities’ internal control over financial reporting.”
The objective of the “user auditor” (the auditor of the client using the services of the service organization), are to obtain an understanding of the nature and significance of the services provided, and evaluate their effect on the user entity’s internal control in order to assess the risks of material misstatement, and to design and perform audit procedures responsive to those risks.
Since the auditor is not in a position to examine the activities of such an outside organization, they will often need to rely on reports of the auditor of the service organization itself, referred to as the service auditor.
The service auditor will usually issue a report on the internal control structure that the user auditor may consider in assessing the internal control structure of the client.
The report on internal control structure by the service organization’s auditor will describe the services of the organization that are covered by the report and a description of the auditor’s procedures.
This will enable the auditor of one of the service organization’s customers to understand the overall impact of the service organization’s work on the internal control structure of the customer.
Before relying on such a report, the auditor should be satisfied as to the competence and independence of the service auditor, and the adequacy of the standards under which the report was issued.
The report of the service organization’s auditor will assist the customer’s auditor in gaining an understanding of the internal control structure of the customer, to the extent it depends on the service organization’s work.
This will not, however, be considered a basis for determining the effectiveness of the customer’s internal control structure, so the use of the report is not a division of responsibility.
As a result, there must be no reference to the auditor of the service organization in the audit report on the financial statements of the customer.
Service Organizations
The objective of the “user auditor” (the auditor of the client using the services of the service organization), are to obtain an understanding of the nature and significance of the services provided, and evaluate their effect on the user entity’s internal control in order to assess the risks of material misstatement, and to design and perform audit procedures responsive to those risks.
Service Organizations
Many companies use various types of service bureaus to assist them with the processing of routine transactions.
Certain transactions, like payroll, may require a particular expertise and can often be processed more efficiently by an entity that specializes in that type of transaction. One of the most common types of service bureaus processes the payroll of various customer entities.
When an entity uses one of these service bureaus, also referred to as service organizations, AU-C section 402, Audit Considerations Relating to an Entity Using a Service Organization, provides guidance as to the impact on an audit.
It defines a service organization as “an organization or segment of an organization that provides services to user entities that are relevant to those user entities’ internal control over financial reporting.”
The objective of the “user auditor” (the auditor of the client using the services of the service organization), are to obtain an understanding of the nature and significance of the services provided, and evaluate their effect on the user entity’s internal control in order to assess the risks of material misstatement, and to design and perform audit procedures responsive to those risks.
Since the auditor is not in a position to examine the activities of such an outside organization, they will often need to rely on reports of the auditor of the service organization itself, referred to as the service auditor.
The service auditor will usually issue a report on the internal control structure that the user auditor may consider in assessing the internal control structure of the client.
The report on internal control structure by the service organization’s auditor will describe the services of the organization that are covered by the report and a description of the auditor’s procedures.
This will enable the auditor of one of the service organization’s customers to understand the overall impact of the service organization’s work on the internal control structure of the customer.
Before relying on such a report, the auditor should be satisfied as to the competence and independence of the service auditor, and the adequacy of the standards under which the report was issued.
The report of the service organization’s auditor will assist the customer’s auditor in gaining an understanding of the internal control structure of the customer, to the extent it depends on the service organization’s work.
This will not, however, be considered a basis for determining the effectiveness of the customer’s internal control structure, so the use of the report is not a division of responsibility.
As a result, there must be no reference to the auditor of the service organization in the audit report on the financial statements of the customer.
Service Organizations
Since the auditor is not in a position to examine the activities of such an outside organization, they will often need to rely on reports of the auditor of the service organization itself, referred to as the service auditor.
The service auditor will usually issue a report on the internal control structure that the user auditor may consider in assessing the internal control structure of the client.
Service Organizations
Many companies use various types of service bureaus to assist them with the processing of routine transactions.
Certain transactions, like payroll, may require a particular expertise and can often be processed more efficiently by an entity that specializes in that type of transaction. One of the most common types of service bureaus processes the payroll of various customer entities.
When an entity uses one of these service bureaus, also referred to as service organizations, AU-C section 402, Audit Considerations Relating to an Entity Using a Service Organization, provides guidance as to the impact on an audit.
It defines a service organization as “an organization or segment of an organization that provides services to user entities that are relevant to those user entities’ internal control over financial reporting.”
The objective of the “user auditor” (the auditor of the client using the services of the service organization), are to obtain an understanding of the nature and significance of the services provided, and evaluate their effect on the user entity’s internal control in order to assess the risks of material misstatement, and to design and perform audit procedures responsive to those risks.
Since the auditor is not in a position to examine the activities of such an outside organization, they will often need to rely on reports of the auditor of the service organization itself, referred to as the service auditor.
The service auditor will usually issue a report on the internal control structure that the user auditor may consider in assessing the internal control structure of the client.
The report on internal control structure by the service organization’s auditor will describe the services of the organization that are covered by the report and a description of the auditor’s procedures.
This will enable the auditor of one of the service organization’s customers to understand the overall impact of the service organization’s work on the internal control structure of the customer.
Before relying on such a report, the auditor should be satisfied as to the competence and independence of the service auditor, and the adequacy of the standards under which the report was issued.
The report of the service organization’s auditor will assist the customer’s auditor in gaining an understanding of the internal control structure of the customer, to the extent it depends on the service organization’s work.
This will not, however, be considered a basis for determining the effectiveness of the customer’s internal control structure, so the use of the report is not a division of responsibility.
As a result, there must be no reference to the auditor of the service organization in the audit report on the financial statements of the customer.
Service Organizations
The report of the service organization’s auditor will assist the customer’s auditor in gaining an understanding of the internal control structure of the customer, to the extent it depends on the service organization’s work.
This will not, however, be considered a basis for determining the effectiveness of the customer’s internal control structure, so the use of the report is not a division of responsibility.
As a result, there must be no reference to the auditor of the service organization in the audit report on the financial statements of the customer.
Service Organizations
Many companies use various types of service bureaus to assist them with the processing of routine transactions.
Certain transactions, like payroll, may require a particular expertise and can often be processed more efficiently by an entity that specializes in that type of transaction. One of the most common types of service bureaus processes the payroll of various customer entities.
When an entity uses one of these service bureaus, also referred to as service organizations, AU-C section 402, Audit Considerations Relating to an Entity Using a Service Organization, provides guidance as to the impact on an audit.
It defines a service organization as “an organization or segment of an organization that provides services to user entities that are relevant to those user entities’ internal control over financial reporting.”
The objective of the “user auditor” (the auditor of the client using the services of the service organization), are to obtain an understanding of the nature and significance of the services provided, and evaluate their effect on the user entity’s internal control in order to assess the risks of material misstatement, and to design and perform audit procedures responsive to those risks.
Since the auditor is not in a position to examine the activities of such an outside organization, they will often need to rely on reports of the auditor of the service organization itself, referred to as the service auditor.
The service auditor will usually issue a report on the internal control structure that the user auditor may consider in assessing the internal control structure of the client.
The report on internal control structure by the service organization’s auditor will describe the services of the organization that are covered by the report and a description of the auditor’s procedures.
This will enable the auditor of one of the service organization’s customers to understand the overall impact of the service organization’s work on the internal control structure of the customer.
Before relying on such a report, the auditor should be satisfied as to the competence and independence of the service auditor, and the adequacy of the standards under which the report was issued.
The report of the service organization’s auditor will assist the customer’s auditor in gaining an understanding of the internal control structure of the customer, to the extent it depends on the service organization’s work.
This will not, however, be considered a basis for determining the effectiveness of the customer’s internal control structure, so the use of the report is not a division of responsibility.
As a result, there must be no reference to the auditor of the service organization in the audit report on the financial statements of the customer.
Service Organizations
Transactions processed by service organization
(payroll processing) (AU-C 402/AT-C 320)
- Test of Control in place at client.
- Test of Control in place at service organization by another auditor.
- Get report from the other Auditor (service auditor).
- A service auditor should inquire of management about subsequent events.
Service Organizations
Transactions processed by service organization
(payroll processing) (AU-C 402/AT-C 320)
- Test of Control in place at client.
- Test of Control in place at service organization by another auditor.
- Get report from the other Auditor (service auditor).
- A service auditor should inquire of management about subsequent events.
Service Organizations
Transactions processed by service organization
(payroll processing) (AU-C 402/AT-C 320)
- Test of Control in place at client.
- Test of Control in place at service organization by another auditor.
2. 1 Report on whether controls have been implemented and controls operating effectiveness. - Get report from the other Auditor (service auditor).
3. 1 Expresses an opinion on management’s assertions:
3. 2 The report also includes a description of the tests of controls and the results of those tests that were performed by the service auditor.
3. 3 Description of the Scope and nature of procedures performed.
3. 4 ID party specifying objectives.
3. 5 ID purpose of engagement.
3. 6 ID parties Intended use. - A service auditor should inquire of management about subsequent events.
Service Organizations
Transactions processed by service organization
(payroll processing) (AU-C 402/AT-C 320)
- Test of Control in place at client.
- Test of Control in place at service organization by another auditor.
2. 1 Report on whether controls have been implemented and controls operating effectiveness. - Get report from the other Auditor (service auditor).
3. 1 Expresses an opinion on management’s assertions:
3. 2 The report also includes a description of the tests of controls and the results of those tests that were performed by the service auditor.
3. 3 Description of the Scope and nature of procedures performed.
3. 4 ID party specifying objectives.
3. 5 ID purpose of engagement.
3. 6 ID parties Intended use. - A service auditor should inquire of management about subsequent events.
Service Organizations
Transactions processed by service organization
(payroll processing) (AU-C 402/AT-C 320)
- Test of Control in place at client.
- Test of Control in place at service organization by another auditor.
2. 1 Report on whether controls have been implemented and controls operating effectiveness. - Get report from the other Auditor (service auditor).
3. 1 Expresses an opinion on management’s assertions regarding:
3. 11 Management’s description of the service organization’s system fairly presents the system that was designed and implemented during the period.
3. 12 The controls related to the control objectives stated in management’s description were suitably designed and operated effectively during the period.3. 2 The report also includes a description of the tests of controls and the results of those tests that were performed by the service auditor. 3. 3 Description of the Scope and nature of procedures performed. 3. 4 ID party specifying objectives. 3. 5 ID purpose of engagement. 3. 6 ID parties Intended use.
- A service auditor should inquire of management about subsequent events.
Service Organizations
Transactions processed by service organization
(payroll processing) (AU-C 402/AT-C 320)
- Test of Control in place at client.
- Test of Control in place at service organization by another auditor.
2. 1 Report on whether controls have been implemented and controls operating effectiveness. - Get report from the other Auditor (service auditor).
3. 1 Expresses an opinion on management’s assertions regarding:
3. 11 Management’s description of the service organization’s system fairly presents the system that was designed and implemented during the period.
3. 12 The controls related to the control objectives stated in management’s description were suitably designed and operated effectively during the period.3. 2 The report also includes a description of the tests of controls and the results of those tests that were performed by the service auditor. 3. 3 Description of the Scope and nature of procedures performed. 3. 4 ID party specifying objectives. 3. 5 ID purpose of engagement. 3. 6 ID parties Intended use.
- A service auditor should inquire of management about subsequent events.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of ob____ing an un________ing of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
Service Organizations
As part of obtaining an understanding of the inte____ con____s of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a cl____ using a ser____ organization, the auditor should obtain an understanding as to how the client uses the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the aud____ should obtain an un________ing as to how the client uses the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to h__ the cl____ uses the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client u__s the ser____organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
• The na____ of the ser____s provided;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
• The nature of the services provided;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The sign________ of the ser____s to the user entity;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the us__ e___ty;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The ef____ on the u___ entity’s internal control;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s int_____ con____;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The na____ and mat________ of transactions that are processed by the service organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of tra_________s that are pro____ed by the service organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed b_ the ser____ organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
• Inte______ bet____the activities of the user entity and of the service organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
• Interaction between the activities of the user entity and of the service organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
• Interaction between the a_____ies of the u___ entity and of the service organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
• Interaction between the activities of the user entity and of the service organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
• Interaction between the a____ies of the user entity and of the ser____ organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
• Interaction between the activities of the user entity and of the service organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
• Inter_____ between the activities of the u___ entity and of the ser____ organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
• Interaction between the activities of the user entity and of the service organization;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- Interaction between the activities of the user entity and of the service organization;
- The na____ of the rela_______ between the entities;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship bet____ the e_____ies;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities;
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Cont_______ t___s for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities per____ed b_ the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities per____ed by the ser____ organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The un__________ing will include:
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The na____ of the services provided;
- The sign________ of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The ef____ on the user entity’s internal con____;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The na____ and materiality of tra_________s that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and ma______y of tran______s that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Inter_____ between the activities of the us__ entity and of the serv____ organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The na____ of the rela_______ between the en____es; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual t___s for activities performed by the ser____ organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of o______ing an understanding of the internal con____s of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
As part of obtaining an understanding of the internal controls of a client using a service organization, the auditor should obtain an understanding as to how the client uses the service organization.
The understanding will include:
- The nature of the services provided;
- The significance of the services to the user entity;
- The effect on the user entity’s internal control;
- The nature and materiality of transactions that are processed by the service organization;
- Interaction between the activities of the user entity and of the service organization;
- The nature of the relationship between the entities; and
- Contractual terms for activities performed by the service organization.
Service Organizations
The auditor will also ev________ the int______ con____s established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls est______ed by the us__ e___ty to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to admi_____ the rela________ with the ser____ organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The e_____y may, for example, ha__ con___s to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to v____y the ac_____y of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the out___ of the se_____ organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The au_____ will u__ the un_______ing of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the na____ and sig________ of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the ser____s pr____ed b_ the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the e_____y’s related con____s, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to id_____y and a____ss risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess r___s of ma_____ misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The au_____ will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
The auditor will also evaluate the internal controls established by the user entity to administer the relationship with the service organization.
The entity may, for example, have controls to verify the accuracy of the output of the service organization.
The auditor will use the understanding of the nature and significance of the services provided by the service organization, along with the entity’s related controls, to identify and assess risks of material misstatement that may result.
Service Organizations
In some cases, the auditor will be unable to obtain a sufficient understanding of the nature and significance of the relationship with a service organization using the resources available through the user entity.
In such cases, the auditor will obtain a sufficient understanding by performing one or more of the following:
- Obtaining and reading a type 1 or type 2 report, if available;
- Obtain information from contact with the service organization, through the user entity;
- Apply procedures directly to the operations of the service organization; or
- Use the work of another auditor applying procedures designed to obtain the necessary information.
Service Organizations
In some cases, the auditor will be unable to obtain a sufficient understanding of the nature and significance of the relationship with a service organization using the resources available through the user entity.
In such cases, the auditor will obtain a sufficient understanding by performing one or more of the following:
- Obtaining and reading a type 1 or type 2 report, if available;
- Obtain information from contact with the service organization, through the user entity;
- Apply procedures directly to the operations of the service organization; or
- Use the work of another auditor applying procedures designed to obtain the necessary information.
