ISA 402 provides guidance for audits involving which type of organization?

ISA 402 deals specifically with audits of service organizations and provides critical guidance on how auditors should approach the audit of service organizations, particularly in relation to the services they provide to their clients. The standard emphasizes the importance of understanding the controls in place at the service organization that are relevant to the client's financial reporting. It helps auditors evaluate the risks associated with relying on these controls and the impact on the overall audit.

In the context of service organizations, ISA 402 sets out requirements for understanding the nature of the services provided, assessing the risks of material misstatement, and determining how the auditor can obtain sufficient appropriate audit evidence. This is vital as service organizations can have significant effects on the financial statements of their clients due to their roles in processing transactions or holding assets.

While public corporations, non-profit entities, and foreign subsidiaries play important roles in auditing practices, they do not fall under the specific guidance of ISA 402, making this standard distinctively focused on service organizations. Therefore, understanding the implications of ISA 402 is essential for auditors when they are engaged with clients utilizing the services of service organizations.