Scoping Audit of Outsourced Service Provider

B.

When scoping the audit of a service provider to which an organization has outsourced some of its subprocesses, the internal auditor of the organization should first review the contract with the provider.

The contract with the provider sets the framework for the relationship between the organization and the provider. It outlines the scope of the services provided, the service level agreements (SLAs), the responsibilities of each party, and the terms and conditions of the agreement. The contract provides the auditor with an understanding of the risks associated with outsourcing, the control environment, and the contractual obligations that the provider has to meet.

By reviewing the contract first, the internal auditor can identify any gaps between the contractual requirements and the actual services provided by the provider. This enables the auditor to identify and evaluate any control deficiencies and the potential impact on the organization's business processes. Furthermore, the auditor can assess whether the provider has implemented the necessary controls to manage the risks identified in the contract.

Once the contract has been reviewed, the internal auditor can then evaluate the operational controls of the provider. This includes assessing the provider's policies and procedures, as well as reviewing their systems and infrastructure to determine if they are effective in managing the risks associated with the outsourced subprocesses.

The internal auditor should also discuss audit objectives with the provider, as this will help to ensure that both parties are aligned and that the audit is conducted efficiently. The audit objectives should be clear and concise, and should be agreed upon by both parties before the audit commences.

Finally, the internal auditor may also review internal audit reports of the provider to determine if there are any control deficiencies or areas of concern that need to be addressed. This information can be used to inform the scope of the audit and to identify any areas that require additional testing.

In summary, when scoping the audit of a service provider, the internal auditor should first review the contract with the provider, as this provides a framework for understanding the risks associated with outsourcing and the control environment. This should be followed by evaluating the operational controls of the provider, discussing audit objectives, and reviewing internal audit reports of the provider.