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Service organizations, control limits and management override

AUD Chapter 13 · Area II · Blueprint II.C.4–5

Two ideas finish the internal control group. First, part of a client's control system may sit inside another company, such as its payroll processor. Second, no control system is perfect, and the person most able to break it is management. Both produce reliable exam questions, and the SOC 1 report is a favorite for simulations.

In this chapter

1. When part of the client's system lives somewhere else
2. SOC 1 versus SOC 2, and Type 1 versus Type 2
3. Using a SOC 1 Type 2 report
4. When there is no usable report
5. Why internal control can never be perfect
6. Management override of controls
7. Testing journal entries

This chapter has 7 lessons, 50 practice MCQs with explanations and 13 simulations, plus flashcards and a recall sheet.

What this chapter covers

• SOC 1 versus SOC 2
• using a SOC 1 Type 2 report
• inherent limits of internal control
• the risk of management override

Chapter 12: Business processes, walkthroughs and the IT environment · Chapter 14: Materiality and performance materiality