Ebook Auditing Theory: Part 2 - Manpree Kaur

Ebook Auditing Theory: Part 2 presents the following content: Auditing in an EDP Environment; Audit of Financial Statements; Appointment, Right, Duties and Liabilities of an Auditor; Audit of Banking and Insurance Company;...Please refer to the documentation for more details.
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Ebook Auditing Theory: Part 2 - Manpree Kaur Auditing Theory Manpreet Kaur, Lovely Professional University Notes Unit 8: Auditing in an EDP Environment CONTENTS Objectives Introduction 8.1 Scope of Audit in CIS Environment/Impact of CIS on Auditing 8.2 Prerequisites while Auditing in CIS Environment 8.3 Audit Process in an EDP Environment 8.4 Auditing and EDP Environment—Meaning of Electronic Data Processing (EDP) 8.4.1 Basic Features of EDP Environment 8.4.2 Advantages of EDP Systems in Auditing 8.4.3 Audit Procedures in EDP/CIS Environment 8.4.4 How Auditors should Approach Auditing in EDP Environment? 8.4.5 Audit Techniques 8.4.6 Audit Planning 8.5 Auditor’s Challenges and Modern Ways for Auditing Electronic Data Processing (EDP) Accounts or Financial Statements 8.5.1 Advantages 8.5.2 Disadvantages 8.6 Problems Encountered in an Electronic Data Processing Environment 8.7 Internal Controls in an EDP Environment 8.8 Planning an Internal Audit in an Electronic Data Processing Environment 8.8.1 Internal Audit Practices in Relation to Computerized System 8.8.2 Requirements for a Computer Audit Program System 8.9 Computer assisted Audit Techniques (CAATs) 8.9.1 Audit Software 8.9.2 Steps involved in Application of CAAT 8.9.3 Techniques 8.9.4 Uses of CAAT 8.9.5 Considerations in Use of CAAT 8.9.6 Testing CAAT 8.9.7 Measures to Exercise Control over CAAT Applications 8.10 Summary 8.11 Keywords 8.12 Review Questions 8.13 Further Readings 132 LOVELY PROFESSIONAL UNIVERSITY Unit 8: Auditing in an EDP Environment Objectives Notes After studying this unit, you will be able to: State audit process in an EDP environment; Evaluate problems in an EDP environment; Know about control in an EDP environment; Discuss planning an Internal Audit in an Electronic Data Processing Environment; Know about problems encountered in an Electronic Data Processing Environment; Discuss about internal audit practices in relation to computerized system; Know about different Computer Assisted Audit Techniques (CAATs). Introduction Now-a-days, the corporate world is getting more and more inclined towards the use of Information Technology (IT) and Computer Information System (CIS) in their daily operations. This has changed the manner in which the organizations’ carry out their operations and various business processes. This has further led to change in the nature of audit evidences generated by each financial transaction. The method of collection and evaluation of audit evidences has also changed. This requires auditors to possess reasonable knowledge about EDI, SDLC, CASE tools and various hardware & software used in the organization. 8.1 Scope of Audit in CIS Environment/Impact of CIS on Auditing The use of CIS in various organizations has caused drastic impact on audit approaches, techniques, risk involved and internal control methods. Following factors (risks) must be given due consideration while framing an audit plan for an organization: 1. High speed and automatic initiation/execution of transactions: In CIS environment, transactions are processed instantly. Once the transaction is fed into the system, it might get executed automatically without requiring for authorization of the same. Similarly, reports (even complex one’s also) can be generated at a very high speed and can be viewed by multiple users at a time. Thus giving rise to many security issues. 2. Uniform processing of transaction, hence low clerical error: While feeding input, processing transactions and generating outputs, computer system performs multiple checks on data at each at each point of time. Moreover, the processing of transaction is in a uniform manner. Hence the clerical errors generated are minimized. However, there is a shift of errors from human generated errors towards system generated errors. 3. Unintentional or system generated errors: As discussed earlier, there is a shift in nature of errors from human generated to system generated. Errors occur due to lack of experienced personnel. And errors are mainly related to development, maintenance and execution of CIS. 4. Inexperienced personnel: Now-a-days, the technological advancement is occurring at a very fast pace. It has created a deficit of expertise staff to understand the current technology, both at client end as well as auditor end. 5. Concentration of duties: Under CIS environment, more than one kind of task/function can be performed by an individual. This leads to difficulty in segregation of duties among individual. Consequently, it gives rise to a number of security issues also. LOVELY PROFESSIONAL UNIVERSITY ...