Joseph Retail Pvt. Ltd. is a well-known luxury fashion retailer in Delhi, recognised for its premium collection of designer clothing and…

In the given scenario, CA Z, as the statutory auditor of Joseph Retail Pvt. Ltd., is concerned about the effectiveness of controls at the service organisation, specifically the system managed by TrendTech Solutions. To address this concern, TrendTech Solutions should provide a Type 2 assurance report from a practicing-chartered accountant as per SA 402, “Audit Considerations Relating to an Entity Using a Service Organisation”. This report will offer an opinion on the description of the system in use at Joseph Retail Pvt. Ltd., as well as evaluate the effectiveness of the controls implemented by TrendTech Solutions. Using a Type 2 report as audit evidence that controls at the service organisation are operating effectively: If, the user auditor plans to use a Type 2 report as audit evidence that controls at the service organisation are operating effectively, the user auditor shall determine whether the service auditor's report provides sufficient appropriate audit evidence about the effectiveness of the controls to support the user auditor's risk assessment by: (i) Evaluating whether the description, design, and operating effectiveness of controls at the service organisation is at a date or for a period that is appropriate for the user auditor's purposes; (ii) Determining whether complementary user entity controls identified by the service organisation are relevant to the user entity and, if so, obtaining an understanding of whether the user entity has designed and implemented such controls and, if so, testing their operating effectiveness; (iii) Evaluating the adequacy of the time period covered by the tests of controls and the time elapsed since the performance of the tests of controls; and (iv) Evaluating whether the tests of controls performed by the service auditor and the results thereof, as described in the service auditor's report, are relevant to the assertions in the user entity's financial statements and provide sufficient appropriate audit evidence to support the user auditor's risk assessment.