In a pair of proposals that may eliminate much of the confusion surrounding audits of companies that outsource certain functions, such as payroll processing, the Auditing Standards Board has approved the issuance of an exposure draft that splits Statement of Auditing Standards 70 into two separate kinds of standards.Chuck Landes, American Institute of CPAs vice president of professional standards and services, said that the new standards follow the natural lines of division between types of audits — those of audit clients, and those of “service organizations” that perform outsourced functions.

“We decided to divide the standard into two parts primarily because we felt that the type of work being done by service organization auditors — the testing of internal controls — was more closely aligned with other attestation standards, while our auditing standards deal with audits of financial statements,” Landes said.

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