Document ID: chunk:federal_register_of_legislation:F2023C01156:reg:14:p15
Version: federal_register_of_legislation:F2023C01156
Segment Type: reg
Provision Reference: reg 14 (pt 15/22)
Character Range: 46317–49431

entity or another location, or both.  Where direct access is achieved electronically, the user auditor may thereby obtain evidence as to the adequacy of controls operated by the service organisation over the completeness and integrity of the user entity's data for which the service organisation is responsible.

A26.         In determining the nature and extent of audit evidence to be obtained in relation to balances representing assets held or transactions undertaken by a service organisation on behalf of the user entity, the following procedures may be considered by the user auditor:

(a)                Inspecting records and documents held by the user entity: the reliability of this source of evidence is determined by the nature and extent of the accounting records and supporting documentation retained by the user entity.  In some cases, the user entity may not maintain independent detailed records or documentation of specific transactions undertaken on its behalf.

(b)                Inspecting records and documents held by the service organisation: the user auditor's access to the records of the service organisation may be established as part of the contractual arrangements between the user entity and the service organisation.  The user auditor may also use another auditor, on its behalf, to gain access to the user entity's records maintained by the service organisation.

(c)                Obtaining confirmations of balances and transactions from the service organisation: where the user entity maintains independent records of balances and transactions, confirmation from the service organisation corroborating the user entity's records may constitute reliable audit evidence concerning the existence of the transactions and assets concerned.  For example, when multiple service organisations are used, such as an investment manager and a custodian, and these service organisations maintain independent records, the user auditor may confirm balances with these organisations in order to compare this information with the independent records of the user entity.

         If the user entity does not maintain independent records, information obtained in confirmations from the service organisation is merely a statement of what is reflected in the records maintained by the service organisation.  Therefore, such confirmations do not, taken alone, constitute reliable audit evidence.  In these circumstances, the user auditor may consider whether an alternative source of independent evidence can be identified.

(d)                Performing analytical procedures on the records maintained by the user entity or on the reports received from the service organisation: the effectiveness of analytical procedures is likely to vary by assertion and will be affected by the extent and detail of information available.

A27.         Another auditor 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