When an Auditor Is to Conduct an Audit of a Service

question 423

Multiple Choice

When an auditor is to conduct an audit of a service organization, what considerations should the auditor make in the planning stages regarding internal controls of the organization?

• A) The auditor should assess the control risk before obtaining an understanding of internal controls.
• B) The auditor should obtain an understanding of the entity's internal controls after performing substantive procedures.
• C) The auditor should obtain an understanding of the effect of the user organization upon the service organization.
• D) The auditor should be engaged to perform agreed-upon procedures.

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Definitions:

Revenue

The total amount of money received by a company from its sales of goods or services, before any expenses are subtracted.

Corporate-level HR

Human resources management at the strategic level, focusing on policies and decisions that affect the entire organization rather than individual departments or units.

M-form Organizations

Organizations structured in a way that operations are divided into multiple, semi-autonomous units or divisions, each with its own set of functions.

Sustained Competitive Advantage

The ability of a company to maintain its competitive advantage over its competitors over a long period, thereby securing its market position and profitability.