If an External Auditor's Client Has Used a Service Organization

question 2

Multiple Choice

If an external auditor's client has used a service organization during the year for some of its payroll processing and accounting,which of the following steps should the external auditor take if he or she decides to use the service organization auditor's report as audit evidence that the entity's controls are operating effectively for certain assertions?

• A)Consider the sufficiency and appropriateness of the evidence provided by the service organization's auditor's report about the effectiveness of controls intended to prevent or detect material misstatements in the particular assertions.
• B)Double-date the audit report to show the date of the service organization's audit and the date of the client's audit.
• C)The auditor should make reference to the report of the service auditor as a basis,in part,for his or her own opinion on the entity's financial statements.
• D)Re-perform each of the audit tests used by the service organization auditor.

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Definitions:

Outward Shift

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Production Possibilities Curve

A graphical representation showing the maximum combination of goods or services that can be produced with a fixed amount of resources and technology in a given period.

7 Percent Unemployment

A situation where 7 out of every 100 labor force participants are without a job and actively seeking employment, indicating the level of joblessness in an economy.

U.s. Economy

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