Auditing & Assurance Services 6th Edition by Timothy Louwers

Exercise 10

Payroll Processed by a Service Organization. Assume that you are the audit senior conducting a review of a new client's payroll system. In the process of interviewing the payroll department manager, she makes the following statement: "We don't need many controls because our payroll is done outside the company by Automated Information Processing, a service bureau."
Required:
Evaluate the payroll department manager's statement and describe how a service organization affects an auditor's review of controls.