How to Understand Service Organization Controls: Finding the Right Source

Question: Which of the following sources can you use to obtain an understanding of the services, processes, and controls performed by a service organization on behalf of the user entity?

A. The service organization's contract with the user entity.B. The Type 2 SOC 1 report for the subservice organization. C. The engagement letter between the service organization and the service auditor.D. The service organization's management representation letter.

Answer: C. The engagement letter between the service organization and the service auditor.

Explanation:

The engagement letter outlines the scope and objectives of the audit, including the specific services, processes, and controls that will be assessed. This document provides user entities with a clear understanding of the service organization's responsibilities and how their controls align with the user entity's needs.

While other options might offer some information, they are not the primary source for understanding a service organization's controls:

• A. The service organization's contract with the user entity: Focuses on the contractual agreement, not detailed control descriptions.* B. The Type 2 SOC 1 report for the subservice organization: Relevant only if the subservice organization's controls directly impact the user entity's financial reporting.* D. The service organization's management representation letter: Provides management assertions but doesn't offer a comprehensive view of the controls.