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Hello Mike,
In order for the auditor to evaluate the internal control of the service organization, they will need to obtain Type 1 and Type 2 reports from the audit client who enaged a service organization to perform service for them.
My question are as follows:
1. Why the audit client need to obtain the Type 1 and Type 2 report? is it a request from the auditor? or is it a decision from the audit client itself, as they want to make sure they enagae a service organization with good internal control?
2. How does the audit client obtain the Type 1 and Type 2 report? Does it engage another accounting firm to provide the professional service (ie. internal control review), and issue the reports?
Thank you.
Regards,
Marthew“Why the audit client need to obtain the Type 1 and Type 2 report? is it a request from the auditor? or is it a decision from the audit client itself, as they want to make sure they enagae a service organization with good internal control?”
When the audit client is first scouting round looking for an appropriate service provider, (it’s a competitive world out there!), potential providers will provide information concerning their internal controls, systems, risk assessments and how risk is managed, projected time-scales for the delivery of processed data – in short, a technical data tender
And then the client is able to assess the various services offered by different prospective providers and may then select the one that appears best able to service their needs
That’s the report that the external auditor wants to see and probably also wants to see the provider’s up-dated data about target achievement
I believe that that answers your first question
“How does the audit client obtain the Type 1 and Type 2 report? Does it engage another accounting firm to provide the professional service (ie. internal control review), and issue the reports?”
I believe that this too has been answered in my earlier comments on this post
OK?
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