Document ID: chunk:federal_register_of_legislation:F2023C01156:reg:14:p16
Version: federal_register_of_legislation:F2023C01156
Segment Type: reg
Provision Reference: reg 14 (pt 16/22)
Character Range: 49190–52231

may perform procedures that are substantive in nature for the benefit of user auditors.  Such an engagement may involve the performance, by another auditor, of procedures agreed upon by the user entity and its user auditor and by the service organisation and its service auditor.  The findings resulting from the procedures performed by another auditor are reviewed by the user auditor to determine whether they constitute sufficient appropriate audit evidence.  In addition, there may be requirements imposed by governmental authorities or through contractual arrangements whereby a service auditor performs designated procedures that are substantive in nature.  The results of the application of the required procedures to balances and transactions processed by the service organisation may be used by user auditors as part of the evidence necessary to support their audit opinions.  In these circumstances, it may be useful for the user auditor and the service auditor to agree, prior to the performance of the procedures, to the audit documentation or access to audit documentation that will be provided to the user auditor.

A28.         In certain circumstances, in particular when a user entity outsources some or all of its finance function to a service organisation, the user auditor may face a situation where a significant portion of the audit evidence resides at the service organisation.  Substantive procedures may need to be performed at the service organisation by the user auditor or another auditor on its behalf.  A service auditor may provide a type 2 report and, in addition, may perform substantive procedures on behalf of the user auditor.  The involvement of another auditor does not alter the user auditor's responsibility to obtain sufficient appropriate audit evidence to afford a reasonable basis to support the user auditor's opinion.  Accordingly, the user auditor's consideration of whether sufficient appropriate audit evidence has been obtained and whether the user auditor needs to perform further substantive procedures includes the user auditor's involvement with, or evidence of, the direction, supervision and performance of the substantive procedures performed by another auditor.

Tests of Controls (Ref: Para. 16)

A29.         The user auditor is required by ASA 330[11] to design and perform tests of controls to obtain sufficient appropriate audit evidence as to the operating effectiveness of controls in certain circumstances.  In the context of a service organisation, this requirement applies when:

(a)                The user auditor's assessment of risks of material misstatement includes an expectation that the controls at the service organisation are operating effectively (that is, the user auditor intends to rely on the operating effectiveness of controls at the service organisation in determining the nature, timing and extent of substantive procedures); or

(b)                Substantive procedures alone, or in combination with tests of the operating effectiveness of controls at