12-29Based on a cost-benefit analysis, management at First Community Bank decided to contract withTechnology Solutions, a local data center operator, to host all of the bank’s financial reportingapplications. To avoid the significant costs of developing and maintaining its own data center,First Community contracts with Technology Solutions to provide IT server access in a highlysecure, environmentally controlled data center facility owned by Technology Solutions. Similarto First Community, other businesses also contract with Technology Solutions to hostapplications at the same data center.The bank is directly linked through highly secure telecommunication lines to the data center,which allows bank personnel to transmit date to and from the data center as if the data center wasowned by First Community. For a monthly fee, Technology Solutions supports the serverhardware in an environment with numerous backup controls in the event power is lost or otherhardware failures occur. Bank personnel are responsible for selecting and maintaining allapplication software loaded on Technology Solutions servers, and selected bank personnel haveaccess to those servers located at Technology Solutions data center. Bank personnel enter alldata, run applications hosted at Technology Solutions, and retrieve reports summarizing theprocessing of all bank transactions.Required:A) What risks might First Community assume with this approach to IT system support?B) How does the user of Technology Solutions impact First Community’s internal controls?C) What impact, if any, does reliance on Technology Solutions as the data center providerhave on the audit of First Community’s financial statements?
