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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Using the work of others

Thornfield Logistics uses Orbit Hosting, a service organisation, to maintain its inventory system. The audit team of Thornfield concludes that Orbit's services are relevant to the audit and cannot obtain a service auditor's report. Which procedure is most suitable under ISA 402?

The auditor should obtain evidence directly, by requesting access through Thornfield's management to perform procedures at Orbit, visiting Orbit, or using another auditor to do so. Outsourcing does not lower the auditor's responsibility, and management representations alone are not enough.

  1. AReduce the audit risk assessment to low because the activity is outsourced
  2. BContact Orbit through Thornfield's management to request access, or visit Orbit to perform procedures on the relevant controls, or use another auditor to do soCorrect
  3. CInclude a statement in the auditor's report that Orbit's auditor is responsible for inventory balances
  4. DRely solely on the management representation letter confirming the outsourced controls operate effectively

Explanation

ISA 402 allows the user auditor, without a service auditor's report, to obtain evidence by contacting the service organisation through the user entity, visiting it to perform procedures, or using another auditor to do so. Outsourcing does not reduce the user auditor's responsibility, and representations alone are insufficient evidence. Reference to others in an unmodified report is not permitted.

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