Page 41 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

(CNO-SA402.060) When services provided by a service organization are relevant to the audit of a user
entity’s financial statements?
Relevant Services: Services of a service organization are relevant to the user entity's audit if they are part of the
entity's information system related to financial reporting, including relevant business processes and controls.
Services are considered relevant if it affects any of the following.

Shortcut: TOFE Service by Jagga is relevant
Transaction Accounting records: The related accounting records, either in electronic or manual form,
supporting information and specific accounts in the user entity’s financial statements that are used to initiate,
record, process and report the user entity’s transactions.
Operation Procedures: The procedures, within both information technology (IT) and manual systems, by
which the user entity’s transactions are initiated, recorded, processed, corrected as necessary, transferred to the
general ledger and reported in the financial statements.
FST preparation System: The financial reporting process used to prepare the user entity’s financial statements,
including significant accounting estimates and disclosures and
Events and conditions accounting system: How the user entity’s information system captures events and
conditions, other than transactions, that are significant to the financial statements
Significant Class of transaction: The classes of transactions in the user entity’s operations that are significant
to the user entity’s financial statements.
Journal entry Controls: Controls surrounding journal entries, including non-standard journal entries used to
record nonrecurring, unusual transactions or adjustments

(CNO-SA402.080) Objectives of user auditor in accordance with SA 402
Understanding Services: Understand the importance and type of services offered by the service organization,
assessing their effect on the user entity's internal control.(Relevant for audit)
Risk Assessment: Identify and evaluate risks of material misstatement.
Audit Procedures: To design and perform audit procedures responsive to those risks.

(CNO-SA402.100) Type 1 report
Type 1 report is a report that comprises: -
Description of ICS (As at Specified Date): description, prepared by management of the service organisation,
of the service organisation’s system, control objectives and related controls that have been designed and
implemented as at a specified date; and
Opinion on Description & Suitability of Design: A report by the service auditor with the objective of
conveying reasonable assurance that includes the service auditor’s opinion on the description of the service
organisation’s system, control objectives and related controls and the suitability of the design of the controls to
achieve the specified control objectives.

(CNO-SA402.120) Type 2 report
Type 2 report is a report that comprises: -
Description of ICS (As at Specified Date or Throughout Period): A description, prepared by management of
the service organisation, of the service organisation’s system, control objectives and related controls, their design
and implementation as at a specified date or throughout a specified period and, in some cases, their operating
effectiveness throughout a specified period; and
Opinion on Description & Suitability of Design & Results of Test of Controls: A report by the service auditor
with the objective of conveying reasonable assurance that includes: -

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