When an Audit Client Uses a Service Organization to Manage

question 127

Multiple Choice

When an audit client uses a service organization to manage their investment activity,

• A) the auditor can always rely on the internal controls of the service organization.
• B) the auditor must state in their audit opinion that the client uses a service organization.
• C) the auditor can rely on the internal controls of the service organization if the service organization's auditor issues a report on their internal control.
• D) the auditor must rely on the service organization to determine the fair level 1, 2, and 3 estimates.

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Definitions:

Organizational Hierarchy

Organizational hierarchy is a system in which roles and responsibilities are ranked in order from highest to lowest, determining the flow of decision-making and authority.

Cross-Functional Problems

Issues that arise from the interaction of different departments or disciplines within an organization, requiring collaborative solutions.

Coordination Methods

Techniques and approaches utilized to align and manage activities and efforts within an organization or among project members to achieve harmonized goals.

Synergy

The creation of a whole greater than the sum of its parts.