Audit Considerations Relating to Entities Using Service Organizations - Completed
Denise Esdon, Chair
Kjell Larson, Member
Susan Jones, Member
Kevin O'Donovan, External member (KPMG, Ireland)
Jens Poll, External member (Moore Stephens, Germany)
Objective(s) of project
The objective of this project was to revise ISA 402, Audit Considerations Relating to Entities Using Service Organizations.
The IAASB approved ISA 402 (Revised and Redrafted),Audit Considerations Relating to an Entity Using a Service Organization in December 2008. The ISA will be published after the Public Interest Oversight Board has confirmed that due process was followed in its development. The ISA is effective for audits of financial statements for periods beginning on or after December 15, 2009. A Basis for Conclusions will provide background to the project, main comments received on the exposure draft, and the IAASB's conclusions regarding these comments in developing the final standard.
Reasons that drive the need to revise ISA 402 include the following:
- National standard setters have recently reviewed and updated their standards and requested that IAASB consider a revision of extant ISA.
- Since the codification to the extant ISA in 1994, the use of service organizations has advanced and the relationship between service organizations has become more complex.
Task Force progress / Board discussions to date
The IAASB considered and approved the project proposal at its March 2006 meeting. An issues paper was discussed at the September 2006 IAASB meeting.
The IAASB reviewed a first read draft of proposed ISA 402 (Revised and Redrafted) at itsApril 2007 meeting.
A further draft was presented at the September 2007 IAASB meeting. Issues discussed included the applicability of the proposed ISA to audits of shared service centers, the usefulness of Type A reports, and the specification of requirements when information is only available from the service organization.
In December 2007, the IAASB approved an exposure draft of proposed ISA 402 (Revised and Redrafted), Audit Considerations Relating to an Entity Using a Third Party Service Organization.
Forty-nine comment letters were received. The IAASB discussed a summary of significant comments and a revised draft of the proposed ISA at the September 2008 meeting. Significant comments discussed included the applicability of the proposed ISA to audits of shared service center, the alignment of the ISA with ISA 315 (Redrafted), Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment , and ISA 330 (Redrafted), The Auditor's Responses to Assessed Risks, smaller entity considerations, the use of other auditors to obtain sufficient appropriate audit evidence, and subservice organizations.
The IAASB approved ISA 402 (Revised and Redrafted) as a final standard at its December 2008 meeting.