Lecture Notes Ch. 12 (ACCT-422)

Lecture Notes Ch. 12 (ACCT-422) - Chapter 12 Impact of...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 12 Impact of Information Technology on the Audit Process This chapter discusses the integration of information technology into the accounting system, the enhancements and new risks associated with such integration, and the internal controls designed to manage those new risks. As discussed on pages 370 – 372 of the text, information technology (IT) both enhances and introduces new risks to an entity’s internal control system. An obvious enhancement of IT is the ability to process large volumes of data in a cost effective manner. If programmed properly, IT also leads to a reduction in the number of misstatements caused by human error when data is processed manually. The result is that management is provided with higher quality information in a shorter period of time. There are many risks associated with IT. One risk is the loss of audit trail visibility as many of the traditional source documents are eliminated when data is entered directly into the computer and maintained in electronic form only. Another risk is that an improperly programmed accounting system can lead to systematic errors versus the random errors present in a manual system. Yet another risk is the loss of segregation of duties that IT introduces to a company’s internal control structure. With the introduction of IT to a company’s accounting system, many of the duties traditionally segregated are combined and performed by the computer. The computer can both authorize a sales transaction by verifying a customer’s credit limit, and record the transaction in the accounting records. Thus, it is important to ensure that there are internal controls in place to compensate for the loss of segregation introduced with IT. There are 2 types of controls specific to, and designed to reduce the risks associated with, IT systems: General controls and Application controls. General controls are those controls that relate to the entire automated operations and fall into one of six categories: 1. Administration of the IT function - sufficient resources should be allocated to supporting IT, oversight of the IT function within an organization should be handled at the highest of levels rather than delegated to low level employees, and management may consider establishing an IT steering committee to help monitor the company’s IT
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/11/2010 for the course ACCT 422 taught by Professor Blake during the Spring '10 term at MD University College.

Page1 / 3

Lecture Notes Ch. 12 (ACCT-422) - Chapter 12 Impact of...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online