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Chapter 113 4
4.5 References to the work of others in the auditor's report
The auditor shall not refer to the work of others unless required by law or regulation.
If such reference is required by law or regulation, the auditor's report shall indicate
that the reference does not diminish their responsibility for the audit opinion.
Example 1
Service organisations
Kilimanjaro Co uses a service organisation to perform its payroll processing.
The auditor of Kilimanjaro will need to obtain sufficient appropriate evidence
that payroll costs are not materially misstated. This would usually be achieved
by testing the client’s controls and performing substantive procedures on the
payroll figure but as the client does not perform their own payroll processing a
different approach must be taken.
The auditor can arrange with the service organisation to visit their premises
and perform tests of controls. Alternatively, the auditor of Kilimanjaro Co can
contact the service organisation’s auditor to request a type 1 or type 2 report
detailing the control system of the service organisation.
Substantive procedures can be performed in the usual way as payroll records
such as timesheets, contracts of employment, payslips and payroll ledgers will
still exist.
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