Page 141 - DCOM204_AUDITING_THEORY

Unit 8: Auditing in an EDP Environment

9. Use of CAAT: The audit under CIS environment cannot be carried by traditional (manual) Notes
approaches, effectively. Since the processing of transaction in CIS environment is fast and
complicated, the audit must be carried out using Computer Assisted Audit Techniques
(CAAT). This requires a reasonably good amount of IT skills on part of the auditors.

Impact of Changes on Business Process

EDI: Electronic Data Interchange, as the name suggests means exchange of data/information/
documents from one user to another, electronically (with the help of computers). In other
words, EDI is the computer-to-computer exchange of documents/information in public standard
format. Under EDI framework, once transaction (data) is fed into a computer many records are
automatically updated. There is no need to reenter the data into accounting system. This saves a
lot of time & effort and enables an error free Transaction Processing System (TPS).

Process of recording transactions: Unlike, manual system where a transaction goes through a
sequence of steps in order to get recorded in the principal books [Entry Ledger Final Accounts
(Balance Sheet and Profit & Loss Account)]. Under CIS environment, the above mentioned three
processes are carried out simultaneously.

Accounting/Transaction Processing System: As mentioned above the CIS mechanism leads to
abandonment of maintenance primary records.
Table 8.1 : Business Process

Batch Processing OLRT / RTOL System Time Sharing & Service Bureau
(Old Concept) (New Concept) (Distinct & New Concept)
1. It is a simple system 1. OLRT – On-Line / 1. Time sharing is a situation where
and somewhat like Real-Time. a single computer serves more
traditional manual 2. Under this system than one user.
system. transaction are 2. A service bureau is an
2. In this process processed as soon as organization which processes
transactions are they occur. transaction on behalf of its client
accumulated and 3. All the records are organization.
processed in groups. updated E.g.: a service bureau handling
3. In this files are not simultaneously on payroll (including ESI/PF) for a
updated quickly. occurrence of a small company.
E.g.: Accountant transaction. 3. If an organization uses services of
accumulates all the cash E.g.: On issue of a a service bureau then the auditor
receipts vouchers for Sales invoice, Sales must obtain reasonable evidences
the day and updates his ledger and debtor’s in support of the controls
accounting record by ledger are updated, exercised by the client
the end of a working automatically. organization over the activities
day 4. Software packages performed by service bureau.
like Tally, SAP, etc. 4. Nowadays, many of accounting
works like this firms are doing this kind of
activities

Data Storage/file system: The data storage facilities and filing system of the organisation has
gone through drastic changes as result of changes in the style of carrying out business processes.

LOVELY PROFESSIONAL UNIVERSITY 135