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Advanced Auditing

Notes  Explain Computer Assisted Audit Techniques & Tools (CAATTs)
 Describe Specific Problems of Electronic Data Process relating to Internal Control
 Describe Internal Control in an Electronic Data Process Environment
 Explain Appraisal of Accounting Systems and related Internal Control

 Discuss how to Improve Audit Effectiveness

Introduction

In developing audit procedures the auditors have to understand how the accounting information
system record, classify and summarize data. An audit trial can be described as the series of cross
references that enable the auditor to follow transactions from the start to the end to check the
operation performed at each stage of processing e.g. individual may manually record sales
order on a paper form, authorize credit, prepare invoices and record the sales in sales journal.
In such cases the auditor can follow the transaction from the start to the end which is referred to
as audit trial.
Internal Auditors have a big role in an organization. They provide an independent and objective
assurance to the organization that the systems of an organization are working in tune with the
business needs. Their concerns about the organization involve safeguarding of its assets including
data/information and effectiveness and efficiency of its systems.
In a computerized environment, most of the processes and information reside on the computer
systems and an organization depends crucially on proper functioning of these systems for
proper functioning of its business. Further, organizations also depend heavily on the data
stored in these systems for decision-making. As such, the data residing on the computer systems
must meet the three criteria of security viz., Confidentiality, Integrity and Availability for its
proper functioning. To ensure that the systems (whether personnel, hardware, software or data)
of an organization are working in desired way and the data meets the criteria mentioned above,
it is necessary that the computer systems are protected from misuse by unauthorized users and
are secured from any external or internal threat.

8.1 Impact of Technology Revolution on Auditing

“If the automobile and airplane business had developed like the computer business, a rolls
Royce would cost $2.75 and would for 3 million miles on one gallon of gas. And a Boeing
767 would cost just $500 and would circle the globe in 20 minutes on five gallon of gas.” (Tom
Forester in his book ‘The Information Technology Revolution’)
Information Technology (IT) has a deep impact on society in general and accounting and auditing
in particular. After miracle advent of IT, the process of business operations (including Accounting)
are changing so fast that even experts in the field are finding it difficult to keep pace with the
changes. The hardware and software are becoming obsolete in no time. Even before, you become
acquaintance with one software, that become obsolete, in no time and another version or new
software taken its place. In this scenario, it is very important for accounting as well as auditing
professionals to know what the current IT trends are and how they would influence accounting
and auditing world.

As the field of IT is very vast, we are going to discuss the topic only in reference to accounting
and auditing. The concept and objectives of internal control in both condition i.e. (manual
environment and computerized environment) remain the same. However, differences exist
between the two in the method of achieving the objectives. The prime objectives of Electronic

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