AAF 01/06 assurance reports

Assurance Reports on Internal Controls of Service Organisations made available to Third Parties.

Organisations operating within the financial services arena are under increased pressure to ensure that their internal control operations and procedures are efficient, effective, robust and satisfy their control objectives.

Guidance AAF 01/06

Reacting to this pressure, guidance was issued by the Audit and Assurance Faculty of the Institute of Chartered Accountants in England and Wales (ICAEW) to assist directors who want to demonstrate their organisation’s strong internal controls. The guidance, AAF 01/06 replaces AUDIT 4/97 (FRAG 21/94) and although not yet a statutory requirement for organisations, it is becoming an increasingly popular and recognised report upon which third parties rely.

Financial Service Activities
The guidance is specifically developed for a range of financial service activities, including:

  • Custody;
  • Investment administration;
  • Investment management;
  • Pension administration;
  • Property management;
  • Fund accounting;
  • Transfer agency;
  • Information technology;
  • Private equity; and
  • Hedge fund management.

Directors of service organisations


Directors who recognise and determine a need to ensure their internal control operations and procedures are efficient, effective and robust have the following responsibilities:
  • Acceptance of responsibility for internal controls;
  • Evaluation of the effectiveness of the service organisation’s control procedures using suitable criteria;
  • Supporting their evaluation with sufficient evidence, including documentation; and
  • Providing a written report of the effectiveness of the service organisation’s control procedures for the relevant period.

We have experience as Reporting Accountants for service organisations and can provide a thorough and detailed assurance report resulting in the formation of an independent conclusion as to the assurance of the organisation’s control procedures.

Our engagement as Reporting Accountants will be in accordance with International Standard on Assurance Engagement (ISAE) 3000 and the ICAEW Technical Release AAF 01/06.

In forming our independent conclusion our work is centred on ensuring that the control procedures in place are suitably designed and, if complied with satisfactorily, there is reasonable assurance that the control objectives would be achieved. Our work will include:

  • Understanding the control procedures;
  • Evaluating the Directors’ assertions;
  • Testing the operating effectiveness of specific control procedures; and
  • Obtaining evidence on the effectiveness of control procedures in meeting related control objectives.

To find out more, call us on +44(0)330 024 3200 and talk to one of our experts.

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