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Managing Vendor Relationships

Author: Administrator
Category: Uncategorized

Many organizations outsource a wide variety of services in Business to Business relationships.  The business decision to outsource can be influenced by a number of factors.  Regardless of the underlying reason to outsource to a service provider, the responsibility always remains with the organization.  Outsourcing does not negate responsibility and liability.  As with any vendor selected to perform a service for the organization, a thorough risk assessment on the vendor should be performed prior to outsourcing the services (and records should be kept of the assessment).

Consider the requirements of publicly traded companies in complying with Sarbanes-Oxley.  One of the challenges presented in complying with the legislation is the requirement that the outsourcing company consider the controls at the service organization as it applies to internal controls over financial reporting.   Management must evaluate the controls at the service organization as well as its own monitoring controls over the service organization when it assesses its own internal controls over financial reporting.  It is common place in today’s business environment, for to company to request a SSAE 16/SOC 1 attestation report from the service provider in order to validate that controls are in place, are suitably designed and are operating effectively (under a type 2 report).   The attestation report provided by the service organization demonstrates that the effort has been made to ensure that controls are in place in a variety of areas including but not limited to: protection of confidential client information, ensuring that transactions are processed in a complete, accurate and timely manner, and to ensure that the transaction are processed in a secure environment and are made available.

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