Service Audit Report

How does a service organization disclose the internal controls which have been implemented in the organization to its customers who require a reliable report on the effectiveness of the internal controls practiced by the service organization? The audit report under SAS-70 fulfills this requirement. SAS-70 lays down procedures and guidelines for the service organizations in the manner which the disclosures are to be made and the service auditor issues his report containing his opinion after conducting audit under the guidelines of SAS-70.
SAS-70 provides for two types of Audit reports by the Service Auditor. These are termed as Type I and Type II audit reports. Type I audit reports basically is a snapshot of the internal controls on a specific point of time. Its captures the description of the controls as at a particular time and the independent service auditors opinion thereon. Optionally the report may or may not include the descriptions of the tests undertaken by the service auditor to determine the operational effectiveness of the controls in place at the service organization and the findings of such tests. Further the type I report may optionally include some specific information which may be provided by the service organization for including in the report if the service auditor deems fit for their inclusion.

However the Type II audit reports are on the description of the service organization's internal controls, but must also include a detailed report on testing of the internal controls practiced at the service organization for a period of time which should be not less than six months prior to the date of the report. The report contains the service auditor’s opinion on the effectiveness and adequacy of the internal controls together with description of the controls in use at the service organization. The report must contain the details of the tests conducted by the auditor to determine the effectiveness of the internal controls over the last six months prior to the report date. Optionally the report may disclose certain specific information which may be provided by the service organization for inclusion in the report.

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