Service Organizations- User Auditors

Question 1

Define Service Auditor:

Answer 1

A practitioner who reports on controls at a service organization

Question 2

Define service organization?

Answer 2

Organization that provides services to user entities that are relevant to their internal controls

Question 3

What is a user auditor?

Answer 3

An auditor who audits and reports on the financial statements of a user entity

Question 4

What is a user entity?

Answer 4

Service organization and who’s financial statements are being audited

Question 5

What is a type I report?

Answer 5

Suitability of the design of controls

Question 6

What is a type II report?

Answer 6

Suitability of the design and operating effectiveness of controls

Question 7

T/F: The user auditor should obtain an understanding of the use of a service organization and the impact on internal controls

Answer 7

TRUE which will impact the auditors RMM

Question 8

How can an auditor obtain a sufficient understanding of the user entity if they use a service organization?

Answer 8

Obtain the Type I or Type II report

• The user auditor should be satisfied about (1) the service auditors professional competence and independence (2) the standards that the service auditor followed in issuing the report
• The user auditor should (1) evaluate whether the report provides sufficient appropriate evidence for understanding the user entity’s relevant internal controls (2) whether any complementary user entity controls identified by the service organization are relevant in assessing the risk of material misstatement

Question 9

If the user auditor issues a unmodified opinion, can you reference to the service auditor?

Answer 9

NO!!!!

Question 10

If there is a modified opinion issued, can you reference the service auditor?

Answer 10

Yes, only if it is meaningful to reference the service auditors