What is the background of SAS 70?
There are over 100 Statements on Auditing Standards (SAS) promulgated by the American Institute of Certified Public Accountants (AICPA). In 1988, the AICPA issued SAS 55, titled “Consideration of the Internal Control Structure in a Financial Statement Audit”. SAS 55 required that financial statement auditors assess the internal control related to any process that could impact the client’s financial reporting objectives. In cases where the client outsourced a critical process that impacted the financial statements, the auditor was obligated to assess the internal control of that process as it is performed by the service organization. For example, an auditor might be obligated to examine the manner in which a payroll processing company controls the processing of payroll for its client. This situation was very detrimental to service organizations since all of their clients’ auditors had an obligation to repeatedly perform the same internal controls assessment on their services. Due to the
