Use of service organizations

Explain what a service organization is and explain what are the auditor’s responsibilities in relation to gaining an understanding of a service organization used by an audit client (4)

A service organization is a third party entity that provides accounting related services to user entities which form part of those entities’ financial reporting .

An auditor must obtain an understanding of how the use of these services impact on the user entity’s internal controls pertinent to the audit.Their understanding should be sufficient enough to identity and assess risks of material misstatements which may arise as a result of using service organizations and perform relevant audit procedures to address them.These may include obtaining either report one or report two in order to understand the description and design of internal controls and their operating effectives at service organization, use of another auditor to perform audit procedures at service organization , contacting the service organization through the user entity and directly visiting the service organization to perform audit procedures.

Does this answer the question?I am not so sure whether outlining audit procedures relevant to gaining understanding of service organizations is relevant here .