Understanding The Many Functions Of The Sas 70 Report
Also known as SAS 70, Statement on Auditing Standards No
. 70: Service Organizations focuses on the professional standards related to the assessment of the organizations' internal controls. Service organizations are groups that offer outsourcing services that have great influences on the customers' control environment. These organizations include trust companies, application service providers, hosted data centers as well as medical and insurance claim processors.SAS 70 has two types, namely the type I and the type II. The first type covers the opinion of auditors on the design of the control environment developed and implemented by the organizations. The second type covers the opinion of auditors on the efficiency of the internal control's design. To know more about these auditing standards, let us have a closer look at SAS 70 changing uses as well as users.
Changing Uses
In the late 1990s, the auditing standards have been used by auditors as well as service organizations in non traditional methods. One of the modifications is the special requirement for financial services companies to get a review of SAS 70 in order to satisfy the requirements for the Gramm-Leach-Bliley Act. Another modification is the legality of requests from clients to let a third party assess the internal controls of organizations that offer services to healthcare firms.
Users of Audit Reports That Follow the Standards
The reports are commonly used to establish formal communication among auditors. In addition to this, these are also used to get an understanding of the service organization's internal controls. Above all, the reports are used by service providers to forecast and evaluate the risks associated with the internal control model developed and implemented by a particular organization.
Even if the reports are implemented by Certified Public Accountant (also known as CPA) firms, service organizations have control over the distribution of the reports. However, the reports can only be distributed to the third party that conducted the assessment. These are commonly restricted to the management, customers as well as financial statement auditors of the service organizations.
Frequency of Auditing
Service organizations should know the frequency of the internal control assessments conducted by auditors. Type I and type II SAS 70 reports are usually conducted once a year. Among these types, it is the second type of reports which is required by the government based on the development and implementation of the Sarbanes-Oxley Act. The organizations decide which of the two types of reports they conduct, but most organizations prefer to have the second type of audit report.
Differences Between the Two Types of Audit Reports
The first type focuses on the fairness of internal control design implemented by the organizations based on the control objectives that the groups conceptualized. The first type do not have important value to clients. This is only valuable or significant to the organizations. The second type the effectiveness of the internal control objectives created by the organizations. Clients and third parties are important to the creation of the type II audit reports since they need to verify if the results of the assessments conducted by auditors are substantial, valid and reliable.
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