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Outsourced services internal controls guidance update

Changes to internal controls guidance will allow a broader range of accountancy firms to carry out assurance engagements with outsourced service providers.

February 2020

ICAEW has published guidance on conducting assurance engagements on the internal controls of service organisations, following a public consultation last year. 

Assurance reports on internal controls of service organisations made available to third parties (TECH 01/20 AAF) replaces TECH 01/06 AAF and will come into effect for reporting periods beginning on or after 1 July 2020.

Organisations often outsource aspects of their business activities to third party ‘service organisations’. The guidance enables service organisations to engage an independent practitioner to provide an assurance opinion on the controls in place over those outsourced activities. 

The opinion can then be made available to user organisations and their external auditors, avoiding the need for several different user organisations to test the same controls.

Changes to the technical release, which was updated with the help of a working party set up by ICAEW’s Audit and Assurance Faculty, include expanded guidance for those conducting the assurance engagement and senior management of service organisations.

Dr Nigel Sleigh-Johnson, Director, Technical Strategy Accountability, said: “The changes made to this key technical release will make it more accessible and are intended to enable a broader range of accountancy firms to conduct this type of assurance engagement. The feedback we’ve received from stakeholders throughout the consultation period has been invaluable and we are grateful to everyone who commented.”

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