Auditing and assurance revision question and answer

Auditing and Assurance Revision Questions and Answers

a) In the context of a computer based accounting system, explain the meaning of the following terms:
i. Application controls; (4 marks)
ii. General controls (4 marks)
b) Explain the importance of having proper systems documentation (6 marks)

c) A Company wishes to change from an old computerized system to a new computer based accounting system. Explain how and why both systems should run parallel prior to the change over to the new system. (6 marks)
(Total: 20 marks)

a) Application controls

These are control procedures over the accounting system designed to provide reasonable assurance that all transactions are authorized, recorded and processed completely, accurately on timely basis. Application controls may be manual or programmed and are include

• Controls over input
• Controls over processing
• Controls over output
• Controls over master files and standing data.
General controls

These are controls which relate to the environment within which computer based accounting systems are developed, maintained and operated aimed at providing reasonable assurance that the overall objectives of internal controls are achieved. These controls could either be manual or programmed.
General controls include

• Controls over systems development and maintenance
• Controls over data files
• Computer operations controls
• Controls to ensure continuity operation.

b) Importance of system documentation.

i. Provides a basis for management to review the system prior to authorization
ii. Staff training on the use of system.
iii. Implements smooth personnel changes and avoiding the problem that key employees may take with them all knowledge about the way the system works.
iv. Revising existing systems and programs
v. It is useful to the auditor for preliminary evaluation of the system and of its controls.
vi. Could assist in disaster recovery.

c) How and why both systems should run parallel prior to the change over to the new system.


The client should continue to process the information using the old system while at the same time implement the new system. The output from the new system should be compared with the output from the new system.


i. Parallel running assists in staff training. The users learn about the features of the new system and compare this with the old system
ii. Assists in testing the new system.

Allows for the systems developers to make any necessary changes to the new system before being fully implemented.

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