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AUD 5.05 - Controls at Service Org

  1. The service organization’s services are considered to be part of a user entity’s __________ system.
    Information
  2. Party Solutions hires Quick Payroll for their payroll services, and ABC Firm as their auditor. Quick Payroll provides payroll services to Party Solutions and hire XYZ Firm as their auditor. Which is the (1) user, (2) service organization, (3) user auditor, (4) service org auditor
    • (1) Party Solutions
    • (2) Quick Payroll
    • (3) ABC Firm
    • (4) XYZ Firm
  3. What are the objectives of a service auditor to complete a Type 1 report?
    • Obtain an understanding of and evidence regarding
    • ** management’s description of the service org’s system
    • ** the design of its internal controls
    • ** whether the design meets the control objectives
    • as of a specific date
  4. What are the objectives of a service auditor to complete a Type 2 report?
    • Obtain an understanding of and evidence regarding
    • ** management’s description of the service org’s system
    • ** the design of its internal controls
    • ** whether the design meets the control objectives
    • ** whether the controls are operating effectively
    • over a period of time
  5. True / False: The service organization’s auditor must test and report on all internal controls of the service organization for both a Type 1 and Type 2 report.
    • False
    • The service organization’s auditor will perform an audit only of the internal controls that are relevant to the user not all internal controls
  6. Which standards are used to guide the service organization’s auditor?
    SSAE: Statements on Standards for Attestation Engagements
  7. When issuing a Type 1 report, a specific Other Matter paragraph must be included. What is the content of this paragraph?
    “We did not perform any procedures regarding the operating effectiveness of controls stated in the description and, accordingly, do not express an opinion thereon.”
  8. True / False: A Type 1 report can be issued for general use.
    • False
    • It must be restricted to the service organization and its clients (those that use its services)
  9. True / False: A Type 2 report can be issued for general use.
    • False
    • It must be restricted to the service organization and its clients (those that use its services)
  10. How can the user auditor utilize a Type 1 report from a service organization
    To obtain an understanding of controls, but not to reduce the control risk. Control risk must remain at maximum because the operating effectiveness has not be audited.
  11. How can the user auditor utilize a Type 2 report from a service organization
    It may provide evidence that would allow a reduction in the assessed level of control risk.
  12. Suppose the Type 2 report does not provide evidence sufficient for the user auditor to reduce the control risk. What procedures must the user auditor perform?
    • Obtain evidence either by (1) testing the user organization’s controls over the service organization’s activities, OR
    • (2) performing tests of controls at the service organization
    • Suppose the user auditor is consider user of the Type 2 report to reduce audit risk. What procedures must the user auditor perform before using the report?
    • Evaluate the service auditor’s competence and independence
    • Evaluate the adequacy of the standards under which the report was issued
  13. The user auditor is unable to obtain sufficient evidence regarding the services provided by the service organization. How does this affect the user auditor’s opinion?
    • Scope limitation
    • Qualified or Disclaimer of Opinion
  14. The user auditor uses the Type 2 report and issues an unqualified opinion. How is the Type 2 report indicated in the user auditor’s report?
    The user auditor does not make reference to the report. The service organization internal control assessment is considered the same as if performed by the engagement team.
  15. The user auditor uses the Type 2 report but issues a modified opinion. How is the Type 2 report indicated in the user auditor’s report?
    The user auditor may make reference to the work of the service auditor to explain the modified opinion.
Author
BethM
ID
332892
Card Set
AUD 5.05 - Controls at Service Org
Description
Becker Review 2017
Updated

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