Computer auditing and the use of the computer - summary (стр. 3 )

·  large number of users can gain access

·  management can exercise control over access

·  need specialised knowledge and skills for installation and maintenance

Software used by auditor includes GAS and Computerised audit Working Paper Programme

Characteristics of CWPP – must have the ability to :

·  transfer TB electronically

·  allocate schedule codes to accounts / generate lead schedules, journal entries and prev year’s balances

·  consolidate group accounts

·  record important matters for easy revision by auditor

·  generate variation and ratio analyses

·  adapt master programmes to needs of individual clients and also develop audit tests for key balances

·  generate journals (and convert them to standard journals)

·  generate financials without having to transfer data to another software package.

General characteristics for choice of CWPP :

·  cost and maintenance

·  system support / supplier support

·  adaptability or capacity for expansion

·  ease of installation

Technical characteristics of CWPP :

·  automatic generation of lead schedules

·  ability to have important info or notes on hand for review and revision by audit partner

·  ability to transfer and adapt to each client

·  ability to generate journals for discussion and then to transfer then into standard journals.

Use CAAT’s to do : ·  substantive testing on transactions and balances ·  analysing and selecting samples from large volume transactions ·  analytical procedures ·  testing programme controls

 

 

Factor’s that influence decision to use CAAT’s :

·  complexity of client’s system

·  volume of transactions / output

·  data stored in electronic form

·  computer skills of audit team

·  attitude of client

·  utilities available at client

·  cost associated with obtaining the data

·  compatibility of firm’s hardware and software with client’s

·  potential loss of independence – CAAT’s need co-operation of client and is system orientated

Audit functions that can be performed using data-orientated CAATs :

·  sorting and file re-organisation

·  summarisation, stratification and frequency analysis

·  extracting samples

·  exception reporting

·  file comparison – e. g. current masterfile to prior year’s masterfile

·  analytical review – e. g. extraction of ratios

·  casting and recalculation

·  examining records for inconsistencies, inaccuracies and missing data (and creating a report of this)

Advantages of CAAT’s :

·  can achieve audit efficiency by saving time

·  reduction in audit costs

·  improves quality of audit (as larger samples or all the data can be tested CAAT’s achieves more extensive reperformance, precision and conclusive results)

·  better knowledge of computerised info system

·  can deal with large volumes

·  audit staff develop improved expertise

·  reduces reliance on client’s computer personnel (IT staff)

·  improves client service

·  availability of CAAT’s and computer facilities ·  impracticality of human / manual testing ·  effectiveness and efficiency

Factor’s to be considered when using CAAT’s :

·  computer knowledge, competence and experience

·  timing of testing

·  other considerations :

Ш  cost of software to benefits achieved

Ш  possible need for specialised equipment / peripherals

Ш  risk of CAAT’s corrupting client’s data and so need to back up data for audit testing purposes for on-line system

Planning with CAAT’s very important - specifically :

·  knowledge of client’s business

·  audit plan – audit staff training, experience, hardware needed, how does client retain data etc

·  data file management – audit testing data must recon to client’s info (e. g. control totals)

·  manually ·  using CAAT’s Ш  test data Ш  reprocessing Ш  simulation Ш  program code analysis Ш  audit software

Investigate, reperformance either :

Computer controls :

·  general controls

·  programmed controls

General controls Application controls

Manual controls (can NEVER be computerised)	·  organisational and management controls ·  staff practices (e. g. rotation of staff)	·  input controls (completeness) ·  checking of recons
Programmed controls (can ONLY be programmed)	·  access control over programs ·  passwords on operating systems	·  input controls (accuracy) ·  field size test
Combination of manual and programmed controls (EITHER computerised or manual)	·  system development and implementation controls ·  project authorisation	·  input controls (validity) ·  authorisation of input documents (either manually signed or entering of authorisation code)

Methods of testing controls using programmed controls :

·  control and reprocessing – re-process selected transactions under the auditor’s supervision. So program first checked by auditor and the processing is aimed at testing the functioning of the programmed controls

·  program code analysis – investigation of program coding of production programs to ensure that the necessary programmed controls are present and that the program is correctly coded. Needs high level of technical knowledge and auditor must also ensure that program documentation relates to the production programs in use

·  simulation – processing client’s data on auditor’s simulated program and then comparing the results with the client’s results.

Transactions Balances (assets, liabs Presentation

Assertion / Events equity interest) disclosure

Occurrence	X		X
Completeness	X	X	X
Accuracy	X		X
Cut-off	X
Classification	X		X
Existence		X
Rights & Obligations		X	X
Valuation & Allocation		X	X

 

Assertions for Statement of Financial Position transactions and balances :

Assertion Audit objective - to obtain satisfaction that :

Completeness	individual transactions and balances in respect of specific kind of asset or liability are fully accounted for in the accounting records and financials
Valuation & allocation	the balance for the specific asset or liability has been accounted for at the appropriate carrying value and that the transactions have been correctly allocated to the proper period and recorded at the proper amount
Existence	at a given date the asset or liability did exist and the transactions did take place during the period in question
Rights & obligations	at a given date the asset or liability pertains to the entity and that the transactions did take place during the period in question
Presentation & disclosure	the asset or liability was disclosed, classified and described in accordance with the applicable legal requirements and generally accepted accounting practice

Assertions for Statement of Comprehensive Income transactions and balances :

Assertion Audit objective - to obtain satisfaction that the specific revenue or expenditure :

Completeness	transactions and balances are fully accounted for in the accounting records and financial statements
Occurrence	·  transactions actually took place during the period in question (occurrence) ·  transactions pertain to the entity (validity)
Cut-off / accuracy / classification	transactions are recorded in the proper period, are correctly allocated and are recorded at the proper amount
Presentation & disclosure	balances are disclosed, classified and described in accordance with the applicable legal requirements and generally accepted accounting practice (ISA’s & 4th schedule)

Procedures used by auditor to obtain audit evidence :