Computerized Environment

Approaches to Computerized Environment

1. E-Content:AuditinginaComputer
https://youtu.be/ZrkQQu4iI34?t=57
BasedEnvironment
AuditinginaComputerBasedEnvironment
Introduction
InformationTechnology(IT)isintegraltomodernaccountingand
managementinformationsystems.Itis,therefore,essentialthat
auditorsshouldbeawareoftheimpactofITontheauditofaclient’sfinancial
statements.InformationTechnologyauditing(ITauditing)
beganasElectronicDataProcess(EDP)auditinganddevelopedlargelyasa
resultoftheriseintechnologyinaccountingsystems.
ThelastfewyearshavebeenanexcitingtimeintheworldofIT,
auditingasaresultoftheaccountingscandalsandincreased
regulations.Regardlessofthecomputersystemsused,theauditobjectives
andapproachwillremainlargelyunchangedfromthatiftheauditwasbeing
carriedoutinanon-computerenvironment.
AuditApproachinComputeriszedEnvironment
1.AuditingAroundtheComputer:Itisthetypeofauditingdoneinatraditional
method.Theauditorsummarisestheinputdataand
ignoresthecomputer’sprocessingbutensuresthecorrectnessofthe
outputdatageneratedbythecomputer,thisapproachisgenerallyreferredtoas
“auditingaroundthecomputer”.Thismethodologywasprimarilyfocusedon
ensuringthatsourcedocumentationwascorrectlyprocessedandthiswas
verifiedbycheckingtheoutputdocumentationtothesourcedocumentation

2. 2.AuditingThroughtheComputer:Duetothe“realtime”computer
environments,theremayonlybealimitedamountofsource
documentationorpaperworkhencetheauditormayemployan
approachknownas“auditingthroughthecomputer”.In
thisapproach,thereliabilityandaccuracyoftheresultsare
analysedthroughthecomputer.Thisinvolvestheauditortoperform
testsontheinformationtechnologycontrolstoevaluatetheir
effectivenesslikeCompliancetest,TestPacks,Reprocessing.
3.AuditingwiththeComputer:Theutilizationofcomputerbythe
auditorforsomeauditworkandheusessomegeneralsoftwarefor
thepurposeofcalculatingdepreciation,printingletters,and
duplicatecheckingandfilescomparison.
Thecomputerisnotusedforalltheauditworkanditis
donemanually.
AuditProcessforComputerizedAccountingSystem
Theauditprocessforacomputerizedaccountingsysteminvolvesthefollowing
fivemajorsteps:

3. 1.ConductingPreliminarySurvey:Thisisapreliminaryworktoplan
howtheauditshouldbeconducted.Theauditorsgatherinformation
aboutthecomputerizedaccountingsystemthatisrelevantto
theauditplan.Thisincludesanunderstandingofhowthe
computerizedaccountingfunctionsareorganized,identificationof
thecomputersoftwareused,understandingaccounting
applicationprocessedbycomputerandidentificationapplicable
controls.
2.ReviewingandAssessingInternalControls:Therearetwotypes
ofcontrolsnamelygeneralcontrolsandapplicationcontrols.
GeneralControls:Generalcontrolsarethosethatcoverthe
organization,managementandprocessingwithinthecomputer
environment.Theyshouldbetestedpriortoapplication
controls,
becauseiftheyarefoundtobeineffective,theauditorwillnotbe
abletorelyonapplicationcontrols.Generalcontrolsincludeproper
segregationofduties,filebackup,useoflabels,accesscontrol,etc.
ApplicationControls:Applicationcontrolsrelatetospecifictasks
performedbythesystem.Theyincludeinputcontrols,
processingcontrols,andoutputcontrols.Theyshouldprovide
reasonableassurancethattheinitiating,recording,processingand
reportingofdataareproperlyperformed.
3.ComplianceTesting:Compliancetestingisperformedto
determinewhetherthecontrolsactuallyexistandfunctionas
intended.Thiscanbeperformedbycomparingtheresultsto
predeterminedresultsorbyprocessingdummytransactions.

4. 4.SubstantiveTesting:Thisisperformedtodeterminewhetherthe
dataisreal.Substantivetestsaretestsoftransactionsandbalances
andanalyticalproceduresdesignedtosubstantiatethe
assertions.Auditorsmustobtainandevaluateevidence
concerningmanagement’sassertionsaboutthefinancialstatements.
Theauditormustobtainsufficientcompetentevidentialmatterto
provideabasisforanopinionregardingthefinancialstatements
underaudit.Ifsufficientcompetentevidencecannotbeobtained
thenanopinioncannotbeissued.
5.AuditReporting:Theauditreportwillcontaindetailed
informationonvariousaspectsoftheirfindingsintheprocess
ofauditinacomputerizedenvironment.