ACCA AA · Chapter 10 · Question 10 of 10
Pintle Co outsources its payroll processing to a service organisation. Under ISA 402, which type of service organisation report would provide evidence on the operating effectiveness of controls over a period?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) A Type 2 report covering the design, implementation and operating effectiveness of controls
Explanation
A Type 1 report only describes the system and the design of controls at a point in time. A Type 2 report also includes the service auditor's tests of operating effectiveness over a specified period, so it can support the user auditor's reliance on controls. The service organisation's own accounts and client representations do not address those controls.
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