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CA Final · Advanced Auditing, Assurance and Professional Ethics · Prospective Financial Information and Other Assurance Services

CA Ishita is the service auditor of Nimbus Payroll Services, which processes payroll for many user entities. She has finished her work on a report under SAE 3402 and the service organisation wants to circulate it freely to prospective customers. What is the appropriate view?

The report is relevant only to users who understand how the service organisation's system is used for financial reporting by user entities. The service auditor states this and may add wording restricting distribution to intended users, use by others, or use for other purposes.

  1. AThe report is relevant only to those who understand how the system is used for financial reporting by user entities, and the auditor may include wording restricting distribution to intended usersCorrect
  2. BThe report may be freely circulated since the criteria are public
  3. CThe report must always be filed with the Registrar of Companies
  4. DThe report must include an opinion on the service organisation's own financial statements

Explanation

SAE 3402 states that the criteria are relevant only for giving information about the system and controls to those who understand how the system is used for financial reporting by user entities. The report says so, and the auditor may add wording restricting distribution and use. Option D is wrong because controls related to the service organisation's own financial statements are outside the definition.

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