It is without surprise that with Australia going into recession, businesses are reviewing the cost of doing business in order to survive the turbulent times. Regulators on the other hand are becoming stricter and we are seeing a wave of regulations in the market.

Service organisations will be required to provide assurance on sound internal control structure. In the current economic climate, striking a balance on the cost and compliance burden versus streamlining internal processes is a challenge to service organisations.

Key Issues on GS 007

Guidance Statement GS 007 became operative in the June 2008 Financial year. The guidance statement has a significant impact on service organisations in the following way:
  • It replaces AGS 1026 Superannuation Funds – Auditor Reports on Externally Managed Assets in its entirety and AGS 1042 Reporting on Control Procedures at Outsourcing Entities to the extent that it applies to investment management services.
  • It contains more prescriptive control objectives and controls with minimum set of control objectives prescribed for each service.
  • The service organisation’s report will now include assertions by management over the description of controls, the suitability of the design of those controls and their operating effectiveness during the period.
  • The service auditor’s report will now include a description of the nature, timing and extent of audit tests applied to the control objectives and controls in the service organisation’s report and the results of the auditor’s testing, including all exceptions. This represents a significant increase in the requirements for service auditors.
GS 007 Overview

It provides guidance to user and service auditors in relation to reporting by investment management service organisations to their clients where that reporting is used as audit evidence in audits of the user entity’s financial reports.

Control reports under GS 007 compared to AGS 1026