Relevant to Foundation level Paper FAU and ACCA Qualification Papers F8 and P7 Show
Specific aspects of auditing in a computer-based environmentInformation technology (IT) is integral to modern accounting and management information systems. It is, therefore, imperative that auditors should be fully aware of the impact of IT on the audit of a client’s financial statements, both in the context of how it is used by a client to gather, process and report financial information in its financial statements, and how the auditor can use IT in the process of auditing the financial statements. The purpose of this article is to provide guidance on following aspects of auditing in a computer-based accounting environment:
Exam questions on each of the aspects identified above are often answered to an inadequate standard by a significant number of students – hence the reason for this article. Dealing with application controls and CAATs in turn: APPLICATION CONTROLS Input controls Specific input validation checks may include: Format checks Range checks
Compatibility checks Validity checks Exception checks Sequence checks Control totals Check digit verification Processing controls
Output controls
Master file controls These include:
COMPUTER ASSISTED AUDIT TECHNIQUES (CAATs)
There are three classifications of CAATs – namely:
Dealing with each of the above in turn: Audit software Packaged programs Purpose written programs Enquiry programs Test data Integrated test facilities
Other techniques Other CAATs include: Embedded audit facilities (EAFs) Application program examination Summary Written by a member of the audit exam team Which internal control procedures are most likely to be used by the company to maintain accurate inventory records?Which of the following internal control procedures most likely would be used to maintain accurate inventory records? Periodic inventory counts are used to adjust the perpetual inventory records.
Which of the following controls most likely would help ensure that all credit sales?Which of the following controls most likely would help ensure that all credit sales transactions of an entity are recorded? The billing department supervisor matches prenumbered shipping documents with entries in the sales journal. The sequential numbering of documents provides a standard control over transactions.
Which of the following may imply that internal controls are ineffective?Which of the following may imply that internal controls are ineffective? Misstatements detected by analytical procedures.
Which of the following procedures is considered a test of controls?Which of the following procedures is considered a test of controls? An auditor interviews and observes appropriate personnel to determine segregation of duties.
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