System Audit

SYSTEM AUDIT
MTE4- SYSTEM AUDIT

LESSON 1 – SYSTEM AUDIT
Learning Outcomes:
At the end of the session, the students should be
able to:
1. Define the audit and information system

2. Recognize an integrated audit and a financial
statement audit report.
3. Explain the types of audits
4. Define the purpose of audits and process
2
MTE4 – SYSTEM AUDIT
is an objective examination and evaluation of the

financial statements of an organization to make sure that
the records are a fair and accurate.
3
It is an investigation to review the performance of an

operational system.
4
Important Basics of Auditing

•Financial statement audit
•Audit of ICFR
•Integrated audit
•What it means when an auditor
issues an “unqualified” or “clean”
audit report on ICFR and the
financial statements
5
An Integrated Audit
Exhibit 1-1
6
A Definition of Auditing
Auditing is a systematic process of
objectively obtaining and evaluating evidence
regarding assertions about economic actions
and events to ascertain the degree of
correspondence between these assertions and
established criteria and communicating the
results to interested users.
American Accounting Association, Committee on Basic Auditing Concepts, A Statement of Basic Auditing
Concepts
(Sarasota, FL: American Accounting Association, 1973)
7
There are a number of types of audits that can be

conducted, including the following:
• Compliance audit
• Information System Audit
• Tax Audit
8
Difference in Accountants and Auditors

• To be an accountant, it is necessary to have
accounting knowledge.
• Understand business transactions
• Know what information to capture
• Know controls needed for activity and
information
• Be able to report it for various purposes
• Be able to record it according to accounting
standards
• To be an auditor, it is also it is necessary to know
audit processes and audit reporting
9
Roles of Auditors and Management
By giving an opinion on financial statement fairness and

ICFR effectiveness the auditor is indirectly reporting on
management’s assertions.
10
The Auditing Process

• Management produces financial statements and ICFR
report
• Auditor gathers and evaluates evidence
• Many forms of evidence; anything the auditor uses
• Auditor uses established standards to compare
evidence to the financial statements and ICFR report
• Looks for correspondence between what is
presented and the underlying evidence
• Uses processes described/required in auditing
standards.
• Auditor issues report
11
BeneficiariesExhibit
of Audits
1-3
12
Value of an Audit
• To society: capital markets benefit
• To owners and prospective owners: remote ownership,
complex transactions, investment decisions
• To corporate governance, the Board of Directors and audit
committee: representing shareholders’ interests
• To management
• running the company with good information
• cost of and access to capital
• operating efficiency and effectiveness
• credibility of performance indicators
• properly accounting for complex transactions
13
Value of an Audit
• Constituents: society, owners and prospective
owners, corporate governance, management
• All of these constituents need good
information. Even nonpublic companies elect
to have audits, although they are not required
to do so by any law or regulation.
14
Standard Setters, Governing Authorities

• Standard setters and governing authorities involved with U.S.
audits
• Congress
• States
• Securities and Exchange Commissions (SEC)
• Public Companies Accounting Oversight Board (PCAOB)
• American Institute of CPAs (AICPA)
• FASB/GASB
• International Accounting Standards Board (IASB)
• International Auditing and Assurance Board (IAASB)
15
Other Audit Related Services

• Internal Auditing
• Operational Auditing
• Forensic Accounting
• General Accountability Office

16
Value of Audit Knowledge for Non-

Auditors
In other words, why is this course required
at most universities for all accounting
majors?
• Understand purpose of auditor’s activities

• Increase efficiency of interface with auditor
• Enhanced communication
• Implementation of ICFR
17
Appendix A- Working in a CPA Firm

Types of Audit Services:
• Integrated audits for larger public
companies
• Financial statement audits for non-
accelerated filer public and non-public
companies
• Reviews of interim financial statements for
public companies
• Reviews and compilations for non-public
companies
18
Other Types of CPA-Provided Services
• Attest engagements
•Assurance engagements
•Tax engagements
• Accounting and bookkeeping
• Business advising/management
consulting
19
CPA Services, “Assurance” and “Nonassurance”

Exhibit A-1 – CPA Services
20
Common Firm Structures

• Sole proprietorship
• Professional corporation
• General partnership
• Limited liability company
• Limited liability partnership
21
Firm Sizes
• Big Four
• International networks; national
• Regional; large local
• Small local
22
Common Auditor Position Titles

• Partner/Owner
• Manager
• In Charge Accountant
• Staff Accountant
23

System Audit

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SYSTEM AUDIT

MTE4- SYSTEM AUDIT

1. Define the audit and information system

is an objective examination and evaluation of the

It is an investigation to review the performance of an

Important Basics of Auditing

There are a number of types of audits that can be

• Information System Audit

Difference in Accountants and Auditors

Roles of Auditors and Management

By giving an opinion on financial statement fairness and

The Auditing Process

Standard Setters, Governing Authorities

Other Audit Related Services

• General Accountability Office

Value of Audit Knowledge for Non-

• Understand purpose of auditor’s activities

Appendix A- Working in a CPA Firm

Other Types of CPA-Provided Services

CPA Services, “Assurance” and “Nonassurance”

Common Firm Structures

• International networks; national

• Regional; large local

Common Auditor Position Titles

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