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CMA Intermediate · Corporate Accounting and Auditing · Application of Technology in Audit and Audit Trail

Regarding audit trail of a service organisation (such as a payroll processor) used by the company, which approach is appropriate for the statutory auditor?

The auditor should consider the service auditor's report, such as a Type 2 report on controls including audit trail, and judge whether it gives sufficient appropriate evidence. Ignoring the service organisation or relying only on management representations is inadequate, and no automatic disclaimer arises.

  1. AConsider the service auditor's report (for example, a Type 2 report) on the controls over audit trail, evaluating its adequacy for the auditCorrect
  2. BIgnore the service organisation, since audit trail only applies to the company's own software
  3. CRely on the service organisation's management representation without further evidence
  4. DReport a disclaimer of opinion automatically

Explanation

Where the company uses a service organisation, the auditor may obtain a service auditor's report on controls, including audit trail, and assess whether it provides sufficient appropriate evidence. Ignoring it or relying only on representations is inadequate, and a disclaimer is not automatic.

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