Computer auditing and the use of the computer - summary (стр. 1 )

COMPUTER AUDITING AND THE USE OF THE COMPUTER - summary

Computer system influences audit procedures :

·  understanding of computer system and internal controls

·  internal controls and control risk influences audit risk decision

·  tests of controls & substantive procedures designed and performed to achieve audit objectives.

100% testing not samples (reduces audit risk), more reliable evidence (no human errors), increased audit efficiency (millions of calcs in minutes)

Consider intended use & if appropriate System CAAT’s (computerised controls) or Data CAAT’s (substantive procedures)

Audit software Simulated data captured on client’s system for processing and then checked against prepared results. General Audit Software / off shelf = GAS retrieval software cheap, widely used but normally specific environment & not all clients. Have limitations Purpose written software – costly and auditor dependent on writer Utilities – use client’s report writer. Not audit tool, needs special care System management programs – used for data retrieval, software comparison. Not meant for audit use.	Control & Reprocessing Select transactions and then reprocessed under auditor supervision (so as to check the programmed controls) .	Simulation Processing client data on auditor’s simulated program and then results compared to client’s original	Program code analysis Tests program code of controls to see if coded correctly – high technical knowledge, must be right version	Test data Simulated data captured on client’s system & then results checked against prepared results. Tests controls & processing on computer system. Either live (must be deleted) or on copy (must be same version). Used when high use of programmed controls, no paper doc trail & large volumes of data processed. Risks – no surprise cos must be arranged with client, can corrupt client’s live data, program used in test may not be program used all year.
Evolving techniques AI & expert systems to copy human judgement in audit process. Takes client’s data for use in auditor’s work papers	Embedded audit routines / concurrent CAAT’s Audit routines built into client’s computer system normally at installation time. Runs at same time so whole period reviewed. e. g. : ·  Snapshots ·  Integrated test facility (ITF) ·  On-line audit / SCARF

 

Data CAAT’s = audit retrieval software : SUBSTANTIVE PROCEDURE!

·  reperforms casts and calcs

·  performs investigations and analyses

·  selects samples

·  extracts summaries / masterfiles

·  performs comparisons

FORMULATE PROCEDURES - SUBSTANTIVE PROCEDURES / TESTS OF CONTROLS :

Use WHAT, TO WHAT, HOW and WHY in every procedure.

Use the correct assertions

Say “use GAS / Audit Software to ……” and end with “follow up differences with management”

Or if doing general tests of controls then also say “discuss any exceptions with management”

Assertions for Balance Sheet : v  existence v  valuation and allocation v  rights and obligations v  completeness

Assertions for Income Statement :

v  occurrence

v  completeness

v  accuracy

v  cut-off

v  classification

IS = OCACC BS = EVRC

Assertions for Presentation and Disclosure :

v  occurrence

v  completeness

v  accuracy

v  classification

v  rights and obligations

v  valuation and allocation

occurrence – took place during period in question and belong to entity (validity)

completeness – no unrecorded / undisclosed items

accuracy – recorded appropriately

cut-off – recorded and allocated to correct period

classification – recorded at correct accounts

existence – asset or liability exists at given date

valuation – recorded at correct value

rights and obligations – belongs to entity at that time

presentation and disclosure – disclosed, classified and described as per Framework

Substantive procedures : v  inspect v  observe v  enquire v  re-preform v  re-calc v  confirm e. g. letter of confirmation SUB = IOERRC

Tests of control :

v  inspect

v  observe

v  enquire

v  re-perform

TC = IOER

Programmed tests of control :

v  control and re-processing

v  programme code analysis

v  simulation

v  investigation

v  reperformance (test data, embedded audit routines)

Substantive procedures – either :

v  tests of detail – inspect

CSIRP

enquire

re-perform

re-calc

confirmation

v  analytical procedures – ratios & trends (to other periods, info & industry standards)

GAS substantive procedures for sales (IS) – use audit software to :

v  extract sample of invoices and inspect that items from stock aren’t fictitious and that invoices are in the name of the company

v  add the sales total on each sequentially numbered invoice for the period and compare the calculated total to the total in the sales account. Print exception report

v  use masterfile document number info to extract sample of invoices after year-end and compare to supporting docs to ensure goods were actually delivered after year-end

v  re-calc total sales by multiplying selling price by quantity sold field (without vat) and then subtract trade discount and compare to the sales amount field

v  compare total sales in the masterfile with the balance in the GL

v  print an exception report with negative values in price or quantity sold fields

v  multiply the selling price per item by the quantity sold and multiply by 14% get the vat total and then compare with amount in vat field

v  perform analytical procedures like :

total sales in current year’s masterfile to total sales in previous year’s masterfile total sales to budgeted sales vat for the year multiplied by 100/14 compared to sales in the GL

and follow up differences with management

GAS substantive procedures for inventory (BS) – use audit software to :

v  recalculate value of inventory at year-end – multiply cost by inventory on hand and compare to the masterfile total

v  compare inventory value in the masterfile with the value in the GL

v  extract an exception report of inventory on hand at year end with a “zero YTD sales figure” to identify slow moving or obsolete stock

v  get the last GRN number for the year and then extract a list of numbers higher then that in to see if have been processed (shouldn’t have been)

v  select sample of high-value items from masterfile and trace cost price to supplier invoices to confirm correct purchase price used

v  select sample of high-value items from masterfile and trace selling price to sales invoice to confirm correct sales price has been used

v  extract sample of items that were adjusted in month before year-end and confirm authorisation for the adjustment (check supporting docs)

v  extract list of items at year-end where the selling price is below the cost price and see if this is listed as an impairment by management

v  can inventory masterfile for “errors” like :

duplicated inventory numbers missing inventory numbers average unit cost exceeds unit selling price zero in quantity field by amounts showing in value field

v  extract list of negative unit cost, selling price or quantity amounts (cos negative times negative is a positive)

v  if imported items then must extract a sample of high value imported items and :

trace to the invoice and reperform calcs to confirm that the correct exchange rate was used and that the import, customs duties and shipping charges were included reperform the weighted average calc (if use this system) verify the invoice is in the name of the entity

v  perform analytical inventory review by comparing current year and prior year figures and ratios for :

total inventory total inventory by category imported / local inventory as a % of current assets and total assets

v  if have allowance for credit losses then perform analytical procedures to give overview as to reasonableness of the allowance by comparison to ratios of prior years and also the allowance compared to actual write-downs