Question

When a client uses a service center for processing transactions, what can the auditor assume about the controls?

1) the auditor can assume that the controls are adequate because it is an independent enterprise.
2) auditing standards require the auditor to test the service center's controls if the service center application involves processing significant financial data.
3) and the user auditor decides to rely on the service auditor's report, the user audit must make reference to the report of the service auditor in the opinion on the user organization's financial statements.
4) none of the above

Answer 1

When a client uses a service center for processing transactions, the auditor cannot assume that the controls are adequate. Auditing standards require the auditor to test the service center's controls if significant financial data is involved. If the user auditor relies on the service auditor's report, it must be referenced in the opinion on the user organization's financial statements.

Step-by-step explanation:

When a client uses a service center for processing transactions, the auditor cannot automatically assume that the controls are adequate because it is an independent enterprise. When a client uses a service center for processing transactions, the auditor cannot assume that the controls are adequate.

Auditing standards require the auditor to test the service center's controls if significant financial data is involved. If the user auditor relies on the service auditor's report, it must be referenced in the opinion on the user organization's financial statements.

Auditing standards require the auditor to test the service center's controls if the service center application involves processing significant financial data. If the user auditor decides to rely on the service auditor's report, the user auditor must make reference to the report of the service auditor in the opinion on the user organization's financial statements.