When a client uses an outside payroll service for processing payroll, professional auditing standards permit the auditor to rely on the internal controls of the service organization if the service organization's auditor has issued a favorable report on the internal controls of the service organization.

Question

Quizplus · Accepted Answer

According to AU-C section 402, an auditor can rely on the internal controls of a service organization if the service organization's auditor has issued a report on the controls, and the report is favorable. This is known as "service organization control (SOC) reports."

When a Client Uses an Outside Payroll Service for Processing