An audit client's decision to outsource its data processing function to an external service provider,would be of significant interest to the auditor,mostly because:
A)It would impact on the auditor's assessment of management integrity.
B)It would impact on the design and effectiveness of the client's internal control system,which would in turn affect the assessed risk of material misstatement.
C)It would result in a major increase to the audit fee.
D)It results in a shift in responsibilities away from the auditee's management to that of the service provider.

Question

Quizplus · Accepted Answer

The decision to outsource data processing will impact the design and effectiveness of the client's internal control system, which in turn affects the assessed risk of material misstatement. This means that the auditor needs to assess the impact of outsourcing on the client's control system and adjust the audit plan accordingly. The management integrity and audit fee may also be affected, but they are not the primary concern in this situation. The shift in responsibilities is also a consideration, but it is not the most significant factor affecting the audit. Therefore, option B is the most appropriate choice.

An Audit Client's Decision to Outsource Its Data Processing Function