Discuss “Audit through the Computer”.

Auditing and Assurance Revision Questions and Answers

Answer
a) Computerization of accounts does not affect the basic objectives of auditing. However, the auditor would need to modify his audit procedures, approach and technical capabilities so as to be able to form an opinion on the accounts processed in a computerized environment.

There are two approaches,
i. Audit around the Computer
ii. Audit through the Computer

Audit through the Computer
Audit through the Computer is the audit, with the help of computer technology in the audit of accounts processed in a computerized environment.
Audit through the computer requires that the auditor submits data to the computer for processing. The results are then analyzed for the processing reliability and accuracy of the computer program. Technical and other developments that necessitated this approach include the following;
 On line data entry
 Elimination or reduction of print outs
 Real time files up dating

The auditor can use the computer to test:
 The logic and controls existing within the system, and
 The records produced the system
Depending upon the complexity of the application system being audited, the approach may be fairly simple or require extensive technical competence on the part of the auditor.

There are several circumstances where auditing through the computer must be used:
a. The application system processes large volumes of input and produces large volumes of output that make extensive direct examination of the validity of input and output difficult.
b. Significant parts of the internal control system are embodied in the computer system. For example, in on line banking system a computer programme may batch transactions for

individual tellers to provide control totals for reconciliation at the end of the day‟s processing.
c. The logic of the system is complex and there are large portions that facilitate use of the system for efficient processing.
d. There are substantial gaps in the visible audit trail.
The primary advantage of this approach is that the auditor has increased power to effectively test the computer system. The range and capability of tests that can be performed increases and the auditor acquires greater confidence that data processing is correct. By examining the system‟s processing, the auditor also can assess the system‟s ability to cope with environment change.
The primary disadvantages of the approach are generally high costs and the need for extensive technical expertise when systems are complex. However, these disadvantages are really not that important if auditing through the computer is the only viable method of carrying out the audit.
Auditing through computer may be conducted through test data, computer programme, etc.



(Visited 18 times, 1 visits today)
Share this on:

Leave a Reply

Your email address will not be published. Required fields are marked *