When a Client Uses a Service Center for Processing Transactions

question 17

Multiple Choice

When a client uses a service center for processing transactions,

• A) the auditor can assume that the controls are adequate because it is an independent enterprise.
• B) auditing standards require the auditor to test the service center's controls if the service center application involves processing significant financial data.
• C) and the user auditor decides to rely on the service auditor's report, the user auditor must make reference to the report of the service auditor in the opinion on the user organization's financial statements.
• D) none of the above.

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Definitions:

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used to analyze the profitability of a projected investment or project.

Mutually Exclusive Projects

Projects that, when considered by a business, only one can be chosen as they compete for the same resources.

Straight-line Depreciation

A process for dividing the price of a tangible property into uniform yearly portions throughout its operational life.

Salvage Value

The estimated residual value of an asset at the end of its useful life, often considered in depreciation calculations.