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Auditing Theory
Notes 3. The statement of financial performance which is commonly known as the statement of
income and expenditure or the profit and loss account,
4. The statement of cash flows,
5. The statement of changes in equity.
These types of packages offering almost all financial reports may be said to be compatible to all
types of financial processing needs and are really expensive and used in many business and non
business entities.
Turning to other packages that don’t offer all statements we can see that they have specific and
limited applications that range from business to non business, some give only the trial balance
leaving the rest of the report to be prepared by the accountant. Others give all other statement
except the cash flows statement. These problem calls for the need to have the so called system
analyst in organizations. These professionals have the responsibility of studying the need of the
organization as refers to electronic processing data issues. They do this by doing a so called
feasibility study which will be facilitated by communication with top financial executives of the
organization.
Electronic data processing has merits and demerits to the society and the professionals. The
following are some of the advantages and disadvantages that may be observed in every day life
of our businesses.
8.5.1 Advantages
1. Fast and instant services in financial institution or banks as compared to manual data
processing, as formally it used to be harder to get even your saving or current statement
from the bank.
2. Records of Retired civil servants were not easily and readily available in the past and
caused much disturbances to old people who had served in the government for many
years; where as in modern electronic data processing such services are performed very
fast and the retiree are free from the former troubles.
3. Performance in manufacturing industries and related works have improved due to
inventory automated systems which controls purchases and stocks so that there is no idle
cash tied into unnecessary stock pile ups.
8.5.2 Disadvantages
The electronic data processing systems have decreased vacancies for accountants as one person
can perform the tasks that could have been done by five people. For example by entering a
transaction where purchases have been bought by cash or on credit, stock will automatically be
adjusted, total purchases also will be adjusted bank account if it is by cash also will be adjusted,
Creditors total amount will be adjusted if the purchase was on credit and finally the financial
statements i.e. financial position statement and financial performance statement and cash flows
if purchase was by cash will automatically be adjusted. These are just few of activities that will
be done after a simple entry of the transaction in the system by one accountant.
Electronic data processing requires more expertise and therefore a lot of money is required to be
invested in IT so that the organization can run smoothly.
It is not possible to use electronic data processing without computers and where there is no
steady supply of power.
After discussing the merits and demerits of electronic data processing in the modern business
arena lets talk a bit about some challenges facing organizations and these systems today. It is a
148 LOVELY PROFESSIONAL UNIVERSITY
