A6 (3) - THE EFFECT OF INFORMATION TECHNOLOGY ON THE AUDIT Flashcards Preview

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Flashcards in A6 (3) - THE EFFECT OF INFORMATION TECHNOLOGY ON THE AUDIT Deck (17):
1

DIFFERENCES BETWEEN MANUAL AND COMPUTERIZED (IT) ENVIRONMENTS

1- Segregation of Duties
2- Disappearing Audit Trail
3- Uniform Transaction Processing
4- Computer-Initiated Transactions
5- Potential for Increased Errors -unauthorized access(
6- Potential for Increased Supervision and Review

2

EFFECT OF INFORMATION TECHNOLOGY ON EVIDENCE GATHERING - Factors affect on audit procedures

1- Extent of computer utilization in accounting application,
2. The complexity of the entity's computer operations,
3. The organizational structure of the IT Dept.
4. The availability of an audit trail, and
5. The use of computer-assisted audit techniques - such as spreadsheet( NSS template)

2

EFFECT OF INFORMATION TECHNOLOGY ON EVIDENCE GATHERING - Use of an IT Professional

1- The CPA's responsibility to Guide IT professionals
2- The auditor need not personally possess the required level of IT skills

3

EFFECT OF INFORMATION TECHNOLOGY ON EVIDENCE GATHERING - The auditor should have enough IT-related knowledge

a. Communicate audit objectives to the IT professional,
b. Evaluate the sufficiency of the procedures performed
c. Evaluate the results of the procedures performed

4

EFFECT OF INFORMATION TECHNOLOGY ON EVIDENCE GATHERING - Auditing Around the Computer

1- Not directly test the application program.

2-Test the input data, processes the data independently then compares the results to the program results

3-Appropriate for simple batch systems with a good
audit trail

4-There is risks of insufficient, paper-based evidence, and insufficient audit procedures

5

EFFECT OF INFORMATION TECHNOLOGY ON EVIDENCE GATHERING - Auditing Around the Computer

1- COMPARE independently results to program results
2- NOT test the application program

6

EFFECT OF INFORMATION TECHNOLOGY ON EVIDENCE GATHERING - Computer Assisted Audit Techniques (CAAT).

1- emphasis on input & processing stages of transaction

2- use if there is In highly automated systems, complex audit trails

7

EFFECT OF INFORMATION TECHNOLOGY ON EVIDENCE GATHERING -(CAAT Uses)

1- Transaction Tagging - mark specific transactions

2- Embedded Audit Modules -collect transaction data.

3- Test Data - application program to process a set of test data, the results of which are already known.

4- Integrated Test Facility (ITF) :- is similar to the test data approach except that the test data is commingled with live data

5- Parallel Simulation (re-performance test) -re-processes
some or all of the c1ienfs live data (using software provided by the auditor) and then compares the results with the client's files.

8

Computer Assisted Audit Techniques (CAAT) - Transaction Tagging

auditor uses to electronically mark (or "tag") specific transactions and follow them through the client's system

9

Computer Assisted Audit Techniques (CAAT) - Embedded Audit Modules

1- application program code that collect transaction data for the auditor

10

Computer Assisted Audit Techniques (CAAT) - Test Data (test deck)

The results of which are already known. (The client's system is used to process the auditor's data, off-line, and while under the auditor's control)

11

Computer Assisted Audit Techniques (CAAT) - Integrated Test Facility (ITF)

1- by processing the test data to dummy accounts (e.g., a fictitious customer, branch, vendor, etc.).

2- Client personnel are not informed that the test is being run

12

Computer Assisted Audit Techniques (CAAT) - Parallel Simulation (reperformance test)

1- With controlled processing, the auditor observes an actual processing run and compares the actual results to the expected results (based on the auditor's program).

2- With controlled re-processing, the auditor uses an archived copy of the program in question

13

EFFECT OF INFORMATION TECHNOLOGY ON EVIDENCE GATHERING - Generalized Audit Software Packages

1- Examining transactions for control compliance.
2. Selecting items meeting specified criteria.
3. Recalculating amounts and totals.
4. Reconciling data from two separate files.
5. Performing statistical analysis on transactions

14

Generalized Audit Software Packages (GASPs) - Advantages of

1- GASPs allow the auditor to sample and test a much higher percentage of transactions, which results In a more reliable audit.

2-GASPs require lillie technical knowledge

3-GASPs can significantly reduce audit time

15

AUDITING WITH A COMPUTER - Advantages

1- Automatic performance of math on all documents, which reduces errors

2- Automatic cross-referencing of amounts by linking each lead schedule to the working trial balance and to the financial statements.

3- Automatic preparation of financial statements, tax return schedules, and consolidating schedules

4- Reduction in required supervisory review time

5- Automatic performance of certain analytical review procedures such as Computing the percentage increase or decrease in each account

16

AUDITING WITH A COMPUTER - Disadvanages

Documentation may not contain readily observable details of calculations.