| SAS 70 Internal Control Audit |
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| Written by Skyler W. Fairchild, CPA | |
| Friday, 07 July 2006 | |
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When a company utilizes (i.e. outsources) to a service organization, transactions that affect the company's financial statements are subjected to policies and procedures that are, at least in part, physically and operationally separate from the company. SAS 70 Internal Control Audit Statement on Auditing Standards (SAS) No. 70 ("Reports on the Processing of Transactions by Service Organizations"), is often referred to as a "SAS 70 Audit". A "SAS 70 Audit" is an audit of the Internal Controls for a service organization.When a company utilizes (i.e. outsource) to a service organization, transactions that affect the company's financial statements are subjected to policies and procedures that are, at least in part, physically and operationally separate from the company. Typically a service organization provides services to a number of companies. A service organization should have a SAS 70 audit performed to provide the companies assurance that the information provided to them is correct. A SAS 70 audit can only be performed by an independent certified public accountant (CPA). A CPA firms that perform SAS 70 audits must adhere to specific professional standards established by the American Institute of Certified Public Accountants.There are two types of SAS 70 audits. A "Type I" report provides assurance over the operating effectiveness of controls for a moment in time (for the year ended 12/31/XXXX). A "Type II" report requires testing procedures to be performed for a period of time not less than six months. Generally the Type II audit is more desirable. Most service organizations elect to have an annual SAS 70 audit performed to provide continuous assurance to the companies.In addition, if a corporation is publicly-traded, Sarbanes-Oxley now requires an audit of the internal controls of that corporation. Typically, all service organizations utilized by a publicly-traded corporation will have a SAS 70 audit performed to satisfy the Sarbanes-Oxley guidance.
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