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

Orbit Payroll Services Pvt Ltd, a service organisation, engages CA Leena to issue an assurance report on controls under SAE 3402. Management wants her to also test controls over preparation of Orbit's own statutory financial statements, which are unrelated to the control objectives in its description of the system. Regarding the scope of 'controls at the service organisation', what is the correct position?

Controls at the service organisation cover those linked to the control objectives in its description of the system, which may include control environment, monitoring and control activities relating to the services. Controls over preparing the service organisation's own financial statements are not included.

  1. AThey include all controls at the service organisation, including those over its own financial statements
  2. BThey include controls related to the control objectives stated in the description of the system, but not controls over preparation of the service organisation's own financial statementsCorrect
  3. CThey are limited to the user entities' controls only
  4. DThey exclude control environment and monitoring aspects in every case

Explanation

SAE 3402 explains that controls at the service organisation can include aspects of user entities' information systems and other components such as control environment, monitoring and control activities when related to services provided. They do not include controls unrelated to the stated control objectives, such as those over the service organisation's own financial statements. Option A is therefore wrong.

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