All of the following are examples of the way internal audits can help a facility or practice except
Relevant to Foundation level Paper FAU and ACCA Qualification Papers F8 and P7 Specific aspects of auditing in a computer-based environmentInformation technology (IT) is integral to modern accounting and management information systems. It is, therefore, imperative that auditors should be fully aware of the impact of IT on the audit of a client’s financial statements, both in the context of how it is used by a client to gather, process and report financial information in its financial statements, and how the auditor can use IT in the process of auditing the financial statements. The purpose of this article is to provide guidance on following aspects of auditing in a computer-based accounting environment:
Exam questions on each of the aspects identified above are often answered to an inadequate standard by a significant number of students – hence the reason for this article. Dealing with application controls and CAATs in turn: APPLICATION CONTROLS Input controls Specific input validation checks may include: Format checks Range checks
Compatibility checks Validity checks Exception checks Sequence checks Control totals Check digit verification Processing controls
Output controls
Master file controls These include:
COMPUTER ASSISTED AUDIT TECHNIQUES (CAATs)
There are three classifications of CAATs – namely:
Dealing with each of the above in turn: Audit software Packaged programs Purpose written programs Enquiry programs Test data Integrated test facilities
Other techniques Other CAATs include: Embedded audit facilities (EAFs) Application program examination Summary Written by a member of the audit exam team What does an internal auditor do?Internal auditors examine and analyze company records and financial documents. They identify issues like compliance concerns, risks, fraud, and data inaccuracies. After reviewing all records within their audit's scope, they investigate any problems they find.
What are audits used for?The purpose of an audit is to form a view on whether the information presented in the financial report, taken as a whole, reflects the financial position of the organisation at a given date, for example: Are details of what is owned and what the organisation owes properly recorded in the balance sheet?
Why internal audit?The role of internal audit is to provide independent assurance that an organisation's risk management, governance and internal control processes are operating effectively.
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