Topic _7 Summary - Steph Endres Augustine Forba William...

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Steph Endres Augustine Forba William Lietz Section 02 SAS 70 Reports Executive Summary What is SAS 70? Statement on Auditing Standards No. 70: Service Organizations, more commonly abbreviated as SAS 70 is an auditing statement issued by the AICPA. SAS 70 provides guidance for independent auditors who issue reports on the processing of transactions by a service organization for use by other auditors. SAS 70 also provides guidance to auditors of financial statements of an entity that uses one or more service organizations. Service organizations are typically entities that provide outsourcing services that impact the control environment of their customers. An example of service organizations are insurance and medical claims processors. What is a SAS 70 Report? SAS 70 is used to report on the "processing of transactions by service organizations". This can be done by completing one of the two types of service auditor reports. A SAS 70 Type I is known as "reporting on controls placed in operation", while a SAS 70 Type II is known as "reporting on controls placed in operation" and "tests of operating effectiveness". In both reports the service organization must prepare a description of its system that includes such things as the nature of the service provided, how the service is performed, and the service organization’s controls over the service and related control objectives. A service auditor may provide two types of reports. In a Type I report, the service auditor expresses an opinion on whether the description is fairly presented and whether the controls included in the description are suitability designed. Controls that are suitably designed are able to achieve the related control objectives if they operate effectively. In a Type II report, the service auditor’s report contains the same opinions that are included in a Type I report but also includes an opinion on whether the controls were operating effectively. Controls that operate effectively do achieve the control objectives they were intended to achieve. A popular misconception about SAS 70 is that service organization can become “SAS 70
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This note was uploaded on 04/22/2011 for the course ACCY 360 taught by Professor T during the Spring '08 term at Northern Illinois University.

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Topic _7 Summary - Steph Endres Augustine Forba William...

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