Page 148 - DCOM509_ADVANCED_AUDITING

Unit 8: Auditing in Computerized Environment

Notes
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Case Study Conducting Audit in an EDP Environment

ohan Sharma has recently joined Mehta and Mehta an audit firm as a senior audit
assistant. Mr. Kamlesh Mehta, partner of the firm ask Rohan to attend a seminar on
R“Audit in an EDP environment” organized by The Institute of Chartered
Accountants of India. He has also been asked to note down the important points raised by
learned speakers in the seminar.

Rohan has noted the following points:
In an EDP (Electronic Data Processing) audit the auditor may not vouch each and every
transaction but he must perform overall analytical checking to ensure that the financial
records show true and fair view of the business entity.

Audit process in such a system may involve following steps:
Evaluation of the internal control system: Auditor should carefully evaluate the internal
control system. He should check the system existing in the entity, as well as its actual use
by the business. It is possible that although a well designed system is present but it is not
put to use by the management. Based upon the evaluation of such a system, the auditor
should decide the degree of reliance that can be placed on it.
Checking the records: After checking the reliability of the internal control system, the
auditor should proceed to checking the record produced by the system. He should check
the basic records available in the entity. As far as possible auditor should insist on
maintaining the supporting vouchers which can be checked with the books of accounts.

Explanation and information: Auditor should make inquiries from the management and
staff regarding the work. Based on such inquiries he can decide upon the truthfulness of
the financial records.
Analysis of the financial statements: Auditor should then check the financial statement
prepared form the books of account. All the other checking methods should be applied as
are used in the manual auditing.
Question:

Prepare a note on the audit process you would follow in conducting audit in an EDP
environment.

Source: http://www.blog.kpoweb.com/27/audit-process-in-an-edp-environment/

8.7 Summary

 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.

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