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

Payserve Ltd, a service organisation, engages CA Tarun for a SAE 3402 report. Management proposes to include in the scope the controls over the preparation of Payserve's own statutory financial statements, saying these are 'controls at the service organisation'. What is the correct view?

Controls over preparation of the service organisation's own financial statements are not part of controls at the service organisation for SAE 3402 purposes. The definition covers only controls related to the control objectives stated in the description of its system, which relate to services provided to user entities.

  1. AThey are included because all controls at a service organisation fall within the definition
  2. BThey are included if the user auditors request it informally
  3. CThey are excluded because controls not related to achieving the control objectives stated in the description of the system, such as those over the service organisation's own financial statements, are outside the definitionCorrect
  4. DThey are excluded only if the report is a type 1 report

Explanation

The material on SAE 3402 states that controls at the service organisation include aspects of user entities' information systems it maintains and may include other internal control components when related to the services. It does not include controls unrelated to the stated control objectives, for example those over preparation of the service organisation's own financial statements. Hence the proposal is wrong regardless of report type.

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