Computerized Auditing Essay
With the introduction of computer systems, conventional accounting systems and methods applying papers, writing instruments and abacuses have been subject to drastic alterations, therefore exerting a great effect on internal control and taxation trails in following examine procedures. Also, the introduction of computer has brought an immense increase in the availability of electronic solutions. My topic is titled auditing in a Computerized Data System (CIS).
One purpose why this topic is included in auditing is due to the rampant adjustments that are happening in our world. We could admit every day, everything around us is going through the process of evolution. Case in point, the government composition, educational composition, social framework, technological composition, economic structure and others ready into comprehensive and widespread changes. Operate nowadays involve the usage of laptop, hence, the advantages of computerized information system in auditing erupted.
Around the world, computer plays an important role in the development of one’s country. For this reason, here in the Philippines, our company is trying to litter through simply by with the radical and major changes in order to be globally competitive. In fact , technology professionals stated that after it comes to new enhancement and improvement of technology, the Philippines can be not far at the rear of, but rather among the fastest region to acclimatize and undertake in this unbelievable wave of changes. With the rapid progress in technology in recent years, computer system information systems have become possible and despejado, perhaps vital, for use also in small-scale business businesses.
Almost all choices now use computers to some extent within their accounting devices. The widespread use of computers has provided new chances for professional accountants and had also made some challenging and exigent problems to auditors. Additionally , in auditing, the need for pc is now crucial and significant because of the increasing and developing demand of auditing.
With out computer, then simply auditing may not be able to cope with this growing demand. Ever before imagine, performing an audit without the usage of computer, isn’t it that it will be very hard for the auditor mainly because we all know, we human beings happen to be immersed and innate with errors. Combining CIS in auditing is usually tough.
The reason is ,; there are technological and methodological matters that an auditor doesn’t have any kind of idea with, for instance, the application, such as working program, power program, etc . Auditors might not have any notion of these things, that’s why auditor tries to expand their understanding in order to be competitive. The result of leading to the growing of auditing. Time and time again, auditing will continue to evolve.
Having said all that, this topic is made up of a lot of different things which can not be found in typical manual auditing. The overall objective and range of an taxation does not change in a CIS environment. However , the use of a pc changes the processing, storage area and conversation of financial information and may affect the accounting and internal control systems utilized by the enterprise.
Accordingly, a CIS environment may influence: a. ) the types of procedures followed by the auditors in obtaining a enough understanding of the accounting and internal control systems; b. ) the consideration of inherent risk and control risk through which the auditors arrive at raise the risk assessment; and c. ) the auditors’ design and satisfaction of checks of control and substantive procedures appropriate to meet the audit goal. Anyways, regardless of extent of computerization or maybe the methods of info processing being used, the institution and setup of ideal internal control systems rests with the managing and those incurred with governance.
The auditor’s responsibility is usually to obtain an understanding of the entity’s internal control system to be able to assess control risk and determine the nature, timing and extent of tests to become performed. Before tackling the top details of my personal topic, let us first specify what is intended by Auditing and Electronic Information System (CIS). So , what is auditing? PSA 2 hundred defines auditing by stating the objective of a financial statement taxation, that is, to allow the auditor to express an impression whether the monetary statements have decided, in all materials respects, relative to the appropriate financial revealing framework.
An even more comprehensive definition of auditing is given by the American Accounting Affiliation: auditing is actually a systematic technique of objectively obtaining and evaluating evidence with regards to assertions regarding economic actions and incidents to ascertain the degree of correspondence between these statements and founded criteria and communicating the results to interested users. Alternatively, computerized info system relates to the usage of pc to develop and collate the info derived within an audit to get the need of the auditor and third parties related.
Another definition of Computerized Info System (CIS) includes, is often a track within the computer scientific research field learning computers and algorithmic processes, including their particular principles and doctrine, their software & hardware models, their applications, and their influence on the general public. (http://www. quora. om/Information-Systems) I would just like to give a brief history of Auditing in a CIS Environment. It began since Electronic Info Process (EDP) Auditing and developed largely as a result of the rise in technology in accounting systems, the advantages of IT control, and the effect of computer systems on the capacity to perform attestation services.
The last few years had been an exciting amount of time in the world of CIS auditing due to the accounting scandals and increased control. CIS auditing has had a comparatively short however rich history when compared to auditing as a whole and remains a great ever changing discipline. The introduction of software into accounting systems changed the way info was stored, retrieved and controlled. It can be believed the fact that first utilization of a computerized accounting program was at Standard Electric in 1954. In the period period of 1954 to the mid-1960s, the auditing profession would still be auditing about the computer.
At this point only mainframe computers were used and few people got the skills and abilities to program computer systems. This started to change in the mid-1960s while using introduction of recent, smaller and less expensive devices. This elevated the use of pcs in businesses and with it came the need for auditors to become familiar with EDP principles in business.
Along with the increase in pc use, came up the go up of different types of accounting systems. The industry shortly realized that they needed to develop their own software program and the to begin the general audit software (GAS) originated. In late 1960s, the American Institute of Certified Community Accountants (AICPA) had the best Eight (now the Big Four) accounting businesses participate in the development of EDP auditing. The result of this is the release of Auditing & EDP. The book included how to record EDP audits and examples of how to process internal control reviews.
Around this time EDP auditors shaped the Digital Data Finalizing Auditors Affiliation (EDPAA). The objective of the affiliation was to generate guidelines, methods and specifications for EDP audits. In 1977, the first copy of Control Objectives was published.
This publication is actually known as Control Objectives for Information and related Technology (CobiT). CobiT is the set of generally accepted IT control targets for IT auditors. In year 1994, EDPAA became known as Information Devices Audit and Control Affiliation (ISACA).
The period from the past due 1960s through today offers seen rapid changes in technology from the microcomputer and social networking to the internet and with these types of changes emerged some key events that change IT auditing forever. The formation and rise in popularity of the Internet and Web commerce have had significant influences around the growth of IT audit. The Internet influences the lives of all of the world and it is a place of increased organization, entertainment and crime.
THAT auditing assists organizations and individuals around the Internet find security whilst helping commerce and communications to prosper. (www. trustsoft. com/pp_ha_1. php) In terms of needed skills and competence in the auditor; he/she should have enough knowledge of the CIS to plan, direct, supervise and review the task performed. The auditor should consider whether specialized CIS expertise are necessary in an taxation. These might be needed to a. ) get hold of sufficient comprehension of the accounting and interior control devices of the CIS environment, m. determine the result of CIS environment for the assessment of related dangers, c. ) design and perform suitable tests of control and substantive procedures.
In planning the parts of the review which may be influenced due to client’s CIS environment, the auditor should get an understanding from the implication and complexity in the CIS activities and the accessibility to data for use in the examine. Such subject that needed understanding are definitely the following; a. ) the significance and difficulty of pc processing in each significant accounting program, b. the organizational composition of the consumer and the extent of attention or division of pc processing through the entity, c. ) the of data (e. g. origin document, computer system files). Electronic information systems have essential and vital characteristics that distinguish them coming from manual control system.
These are the following: a. ) lack of visible transaction trails, n. ) persistence of performance, c. ) concentration of duties, g. ) simplicity of access to info and laptop programs, elizabeth. ) weakness of data and program storage area media, n. Systems generated transactions and g. ) Potential for improved management direction. As regards to deficiency of visible purchase trails, in manual program, it is normally possible to follow a deal through the program; by examining source files, entity’s records, and financial reports. Within a CIS environment, data can be entered straight and unswervingly into the personal computer devoid of helping documents. Furthermore, records and files may not be printed and cannot be go through without using the pc.
The a shortage of these noticeable documents helping the finalizing of ventures makes the study of evidence tougher. In relation to the consistency of performance, CIS performs capabilities exactly as set. If the computer system is set to perform a certain data control task, it is going to never receive tired of executing the designated task in exactly the same fashion. Because of this capability of the computer to process orders uniformly, paperwork errors which can be normally linked to manual finalizing are eliminated. On the other hand, the wrong program could possibly be very devastating because it will certainly result to consistently erroneous data processing.
Third, concentration of duties, in here proper segregation of duties is usually an essential attribute of a audio internal control system. Nevertheless , because of the potential of the computer to process data effectively, there are capabilities that are normally segregated in manual control that are put together in a CIS environment. Being a particular case, in manual processing the function of recording cash disbursements can be incompatible while using responsibility for reconciling cash disbursement.
Seeing that one of these functions serves as the upon the other, determining both capabilities to one staff would allow and permit that employee to commit and conceal errors and irregularities. A properly designed computer, on the other hand, has no propensity or motivation to commit irregularities or perhaps conceal its errors. Therefore what definitely seems to be an contrapuesto combination of capabilities may be mixed in a CIS environment with no weakening and dwindling the internal control provided suitable and appropriate compensating controls happen to be put in place. Next, ease of usage of data and computer applications, in a CIS environment, info and pc programs might be accessed and altered by unauthorized persons leaving not any visible and detectible data.
It is important, therefore , that appropriate and suitable controls will be incorporated inside the system to limit the access to data files and courses only to authorized personnel. Fifth, vulnerability of data and software storage media, in a manual system the records will be written in ink and substantial newspaper. The only way to reduce the information is usually to lose or destroy the physical information. The situation is totally different within a CIS environment.
The information on the computer can be very easily changed, leaving no track of the unique content. This kind of change could happen inadvertently and huge amount info can be quickly lost. Another, systems generated transactions; certain transactions may be initiated by CIS by itself without the need for an insight document. For example , interest may be calculated and charged immediately to customers’ account balances on the basis of pre-authorized terms within a computer program.
Lastly, likelihood of augmented managing supervision, CIS can offer management a variety of analytical tools that may be used to assessment and watch over the procedure of the enterprise. The availability of such tools may enhance the entire internal control structure. There are certain advantages and disadvantages in using pc in the perform of taxation.
Take note the characteristics of computer info system currently tackled previously mentioned pertains to some advantages and disadvantages of CIS. Benefits of it includes, this avoids computational errors generally done by man; eases up and reduce the work of auditor particularly when it comes to timeliness; faster and efficient in processing details; generation and creation of accounting paperwork like accounts, cheques and statement of account will be automatic; more timely details can be made; With the larger reductions in the cost of software and hardware and accessibility to user-friendly accounting software package, it is relatively cheaper just like maintaining a manual accounting system; no more manual processing of the info hence almost all data happen to be automatically been posted for the various ledgers/accounts and others. Alternatively, the cons of CIS are the following: it eliminates part of the examine trail; susceptible to manipulation specifically to unauthorized personnel; the need for back-up files, could effect into even more cost, especially if computer can be susceptible to electricity interruption and from infectious software; hazard of computer fraud in the event proper amount of control and security if internal and external are not properly recently been instituted while others.