When an auditor is to conduct an audit of a service organization, what considerations should the auditor make in the planning stages regarding internal controls of the organization?

Question

Quizplus · Accepted Answer

Choice "C" is correct. In some situations, the controls at a service organization are designed under the assumption that there will be certain complementary controls implemented by user organizations. These complementary controls should be included in the description of controls. The service auditor should obtain an understanding of such situations, in order to evaluate whether the complementary controls are necessary to achieve stated control objectives. Choice "A" is incorrect. The auditor would need to understand controls before assessing their operating effectiveness. Choice "B" is incorrect. Substantive procedures are not performed by a service auditor, who is either reporting on controls placed in operation, or on controls placed in operation and their operating effectiveness. Remember that a service auditor's engagement is not the same as an audit of financial statements. Choice "D" is incorrect. Although a service auditor's engagement differs from an audit of financial statements, it is performed in accordance with the general standards as well as the relevant fieldwork and reporting standards. It is not considered to be an agreed-upon procedures engagement, as the auditor has not been engaged by the service organization to issue a report of findings based on specific, agreed on procedures.

When an Auditor Is to Conduct an Audit of a Service