Scope of this Auditing StandardScope of this Auditing Standard

Scope of this Auditing Standard

1. This Auditing Standard deals with the user auditor’s responsibility to obtain sufficient appropriate audit evidence when a user entity uses the services of one or more service organisations. Specifically, it expands on how the user auditor applies ASA 315[1] and ASA 330[2] in obtaining an understanding of the user entity, including the entity’s system of internal control relevant to the preparation of the financial report, sufficient to identify and assess the risks of material misstatement and in designing and performing further audit procedures responsive to those risks.
2. Many entities outsource aspects of their business to organisations that provide services ranging from performing a specific task under the direction of an entity to replacing an entity’s entire business units or functions, such as the tax compliance function. Many of the services provided by such organisations are integral to the entity’s business operations; however, not all those services are relevant to the audit.
3. Services provided by a service organisation are relevant to the audit of a user entity’s financial report when those services, and the controls over them, are part of the user entity’s information system, relevant to the preparation of the financial report. Most controls at the service organisation are likely to be part of the user entity’s information system relevant to the preparation of the financial report, or related controls, such as controls over the safeguarding of assets. A service organisation’s services are part of a user entity’s information system, if these services affect any of the following:
   1. How information relating to significant classes of transactions, account balances and disclosures flows through the user entity’s information system, whether manually or using IT, and whether obtained from within or outside the general ledger and subsidiary ledgers. This includes when the service organisation’s services affect how:
      1. Transactions of the user entity are initiated, and how information about them is recorded, processed, corrected as necessary, and incorporated in the general ledger and reported in the financial report; and
      2. Information about events or conditions, other than transactions, is captured, processed and disclosed by the user entity in the financial report.
   2. The accounting records, specific accounts in the user entity’s financial report and other supporting records relating to the flows of information in paragraph 3(a);
   3. The financial reporting process used to prepare the user entity’s financial report from the records described in paragraph 3(b), including as it relates to disclosures and to accounting estimates relating to significant classes of transactions, account balances and disclosures; and