Page 46 - CA Final PARAM Digital Book.

SALARY PROCESSING IS
OUTSOURCED

USER ENTITY
25 of Every Month, One Copy of all SERVICE ORGANISATION
th
letters is sent to SO with other Info
CFO Finalise & puts
signature Naresh Receives and
Management I/C/S Confirms it from Clerk
1. Compares with Master File
2. Select 10 Employees in random
selection and check detailed
HR heads approves calculation Mahesh types it and
it with signature 3. 5 Month graphical analysis coverts it in electronic form

Clerk prepares Jignesh uploads it and
documents in orders processing
Triplicate
Ganesh evaluates it ,
Email
finalises & send email

a)
➢ Obtaining Understanding: - Obtaining understanding of entity & its environment is
covered under SA 315 / SA 402 further explains which information should be
obtained if services of SO is used.
As per SA 402 for obtaining understanding of the user entity in accordance with SA 315, the user
auditor shall obtain an understanding of how a user entity uses the services of a service organization
in the user entity’s operation including:

➢ Four Information points are Related to Services.
Nature of Services / Significance of Services / Effect of Services on ICS
/ Nature & Materiality of TBD affected by Service.

• The nature of services provided by the service organisation and the significance of
such services to the user entity, including its effect on the internal control of user
entity.
• The nature and materiality of the transactions processed, or accounts or financial
reporting processes affected by the service organisation.

➢ Three Information Points are Related to SO
Nature of Relationships with SO / Degree of Interaction with SO / Relevant
Controls applied on transactions processed by SO

• The nature of the relationship between the user entity and the service
organization including the relevant contractual terms for the activities undertaken
by the service organisation.
• The degree of interaction between the activities of the service organization and
those of user entity and

When obtaining an understanding of internal control relevant to the audit in accordance
with SA 315 “Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and its Environment”, the user auditor shall evaluate the design
and implementation of relevant controls at the user entity that relate to the services
provided by the service organisation, including those that are applied to the transactions
processed by the service organisation.

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