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.

Question

Quizplus · Accepted Answer

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. This report is called a Service Organization Control (SOC) report, which provides information on the controls in place at the service organization that may impact the audit client's financial statements. The audit opinion should include a reference to the use of the service organization and the reliance on their internal controls.

When an Audit Client Uses a Service Organization to Manage