Based on a cost benefit analysis, management at Two Timer Bank decided to contract with Solution IT, a local data centre operator, to host all of the banks financial reporting applications. To avoid a significant costs of developing and maintaining its own data centre, Two Timer contracts with Solution IT to provide IT server access in a highly secure, environmentally controlled data centre facility owned by Solution IT. Similar to Two Timer Bank, other businesses also contract with Solution IT to host applications at the same data centre.

The bank is directly linked through highly secure telecommunications lines to the data centre, which allows bank personnel to transmit data to and from the data centre as if the data centre was owned by Two Timer Bank. For a monthly fee, Solution IT supports the server hardware in an environment with numerous back up controls in the event power is lost or other hardware failures occur. Bank personnel are responsible for selecting and maintaining all application software loaded on Solution IT servers, and selected bank personnel have access to those servers located at the Solution IT data centre. Bank personnel enter all data, run applications hosted at Solution IT, and retrieve reports summarizing the processing of all bank transactions.

Required:

What risks might Two Timer Bank assume with this approach to IT system supports?

How does the use of Solution IT impact Two Timers internal controls?

What impact, if any, does reliance on Solution IT as the data centre provider have on the audit of Two Timers financial statements?