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Unformatted text preview: Chapter 12 The Impact of Information Technology on the Audit Process Most companies rely on information technology (IT) to record and process business transactions. This chapter highlights how IT affects an audit client’s internal controls, which in turn affects the audit process. Because IT often significantly impacts internal control, this chapter builds upon the discussion of internal control in Chapter 10. Due to the expanding role of IT in the financial reporting process, we believe that some discussion of the material in this chapter is useful in an introductory auditing course. In this chapter, we highlight several of the key issues related to the impact of IT on risks and have identified types of internal controls that are often implemented to reduce those risks. However, the complexities associated with the variety of IT-based systems in existence today and the ever-evolving nature of IT including e-commerce and the Internet can make this a difficult topic to cover. A full discussion of all the issues and details of related controls could easily turn into a full advanced auditing course on IT auditing. Thus, when we teach this chapter in an introductory auditing course, we try to keep in mind that our goal is to provide a brief overview of the IT issues and related IT controls to increase student awareness of the basic impact IT can have on the audit process. Discussion of this chapter should complement material presented throughout the remainder of the textbook that interweaves the impact of IT and e-commerce on various aspects of the audit. If an advanced auditing course is provided, this chapter could be deferred to that course. The following topics are covered: Chapter opening vignette How information technologies improve internal control Assessing risks of IT Internal controls specific to IT General controls Application controls Impact of IT on the audit process Issues for different IT environments, including e-commerce systems Chapter Opening Vignette – “Just Because the Computer Did the Work Doesn’t Mean It’s Right” This vignette illustrates several important points concerning client IT-based accounting systems. First, students must realize the extent of computer processing of accounting information and how important it is for auditors to understand the technology used in the financial reporting process and how it affects internal controls and the audit. Second, as the title indicates, computer output looks good, but that doesn’t mean it’s correct . Computer output must be tested, and evidence must be obtained to support its reliability. In this case, students might be asked what different ways the aging could be tested....
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This note was uploaded on 01/23/2010 for the course ACCOUNTING auditing taught by Professor Pro-abuel-ezz during the Spring '10 term at Cairo University.
- Spring '10