Professional Documents
Culture Documents
Weaknesses To Be Revealed: (15 Marks)
Weaknesses To Be Revealed: (15 Marks)
NAC
Acc 2 3
a Ainagement Audit
Management Audit otherwise called Performance Audit is an
effectiveness of management in the objective and indeperdent appraisal of the
application
policies. It's aim is to identify existing and
of its resources to achieve
company's objectlves and
and to recommend potential management weaknesses within an organization
ways to rectify those weaknesses in order.
to optimize the company's performance.
(b) Weaknesses to be revealed
The weaknesses that management audit might reveal are as follows:
(i) Likely existence of insufficient attention to future planning such as lack of strategic planning,
research and development.
(ii) Poor corporate governance and social responsibilities on the part of the Board and Top
Management.
(ii) Weakness relating to production method.
(iv) Poor recruitment and training policies and
(v) Poor attitude to delegation of developmental programmes.
(vi) Lack of clear and identifiable responsibilities on the part of
management.
management culture.
(vii) Weakness as to maintenance of customers.
(vii) Weak management information
(ix) Inadequate managernent structures
system.
and implementation procedures.
(x) Weakness relating to treasury management.
(xi) Lack of good marketing and sales
policy.
(xii) Lack of compliance with
regulatory and statutory requirements.
(xii) Lack of compliance with trade associates' rules and
(xiv) Poor assets maintenance regulations.
(XV)
culture
Poor attention to moral and ethical issues
by to'p management.
(xvi) Poor attention to established
accounting policies and procedures.
(xvi) Absence of or poor attention to internal audit
reports and recommendations.
auditing & assurance
chapter 8: audit repo1
Chapter Eight
AUDIT REPORT
SECTION A
E
D
6.
E
B
9. D
10. E
SECTION B
**
. False
2. Communication gapP
3. The Primary.Auditor-
4 False
5. True
159
WySE Publishing
Questions
auditing & assurance
*"
Questions
chapter,8: audit report
auditing & assurance
Ensure that proper books of accounts have been kept as required by Companies and
Allied Matters Act 1990.as amended,
Ensure that the accounting policies are in accordance with the generally accepted
accounting practices and are appropriate in the circumstances given the nature of the
enterprise/business.
iv Ensure that the company's system of inter'nal control is evaluated and checked to be
effective throughout the period.
Check that all requirements of the auditing standards have been complied with.
160
Questions
WySE Publishing
Acc 223 Auetkin
COMPUTERAUDIT
.*
( 2 ) On-line Systemi:
This is a computer processing system, whereby the pe ipherals e.g. input
equipment, output equipment and extemal storage equipment are all connected direculy
to the central processing unit via communication channels uch as cables, telephone
lines and satëllite network. The system is off-line if the peripherals are not so
Connected.
i r e e real-time system
A real-time system is the onein which data is received and processed and results
transmitted quickly to influence a decision to be made or a course of action to be
followed.
Present day àirline reservation processing system is.e:kample of OLRT system.
Using a special point-of-origin device of input and output, the ticket clerk checks a
central comaputer data file for seat availability ona desired fight. Ifa seat is available
and the customer wishes to take the seat, the clerk touches a"preserve" button and
supplies the passenger's name, causing the computer to red. ze the available seat
UUU"
T T T T T T T T 7
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33 00MPUTERAUDI
nventory by one and add the name of the passenger list for the flight.
Unlimited Açcess
Loss of data
Unauthorised access
Loss of audit trail
Distortion of data
Cormuption offiles
Invasion ofprivacy
Inadequate back-up
Soiutions:
Use ofpassword
Use of CAATS
Use oflogbook or register
Database Management System Control
Restriction of Access to unauthorisedperson_.
(5) Centralised Processing: This is a method of data processing in which all EDP
works are performed bya central unit. The user departmens send their data to the EDDP
department where the datais processed and output given baçk to them.
(6) Decentralised Procéssing: This is a situation whereby each departments has its
owp data processing equipment and staff. Itmeans that each unit within the organisation
maintains an independent Electronic Data P:ocessing (EDP) function.
7) Distributed Data Processing: Under this method, each unit within the
organisation maintains an EDP function. This EDP functions are generally linked to one
anotherandto a central coniputer in the fom ofa ntwork.
It offers flexibility to each unit of the organisation and also encourages a measure of
Centralised control over data processing
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23-COMPUTER AUDIT
23.3 Relevance of Computers to Auditors
A computer as a means of data processing and storage has tremendous
advantags over conventional manual and
mechanical data processing systems. Sorme of
the advantages offered by
computer system are:
High speed of data processing: Computers are capable of executing several
millions ofprocessing instructions within a fraction
of a second. Consequently, a
computer can process transaction data in few seconds that ordinarily
several weeks to process under conventional
will require
accounting systems.
2) Computers unlike conventional accounting systems are less prone to processing
A erTOTs. naddition, computer processing is consistent and unlike processing
under conventional systems, is not characterised by random érrors.
(3) Unlike conventional accounting systems computers have grate apability for
perfomirg complex manipulations on data.
(4) Computers have high capacity and compact storage. Unlike manual storage that
consumes a lot of storage space, computer storage Save storage
space.
(5) Computers provide facilities foreasy retrieval of data and information from
storage. This is unlike conventional accounting systems where tedious and tinme
consuming search may be required before previously stored data or information
can be retrieved.
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23 COMPUTER AUDIT
There is no visible
"audit trial) as in the manual system
could be trailed
'
whereby a transaction
through the records from origin to the end.
system, this information is held in invisible form. Ina computerised
(2) The programme of instructions is in machine
**
sensible form.
(3) All operations within the
evidence of processing.
cormputer is done electronically and there is no visible
a
unique reference back to the phginal source of
Tecord the japutfeg. a sales system transaction
should hold areferençe to th
customer ordet delivery nate and invoice). Where
master lerecords are updated sevetal times, orfromseveral souades, the provision of a
sausiactory audit trailis more dificat, but some atterppt should nevertheleas be made to
provide one.
pical audit problemsfhat arise as audit tyails move fuyheraway from the hard
corytral irckude: .
atesting comltergeperated totalswhen fo detailed analysis is available;
(6)testing theeompleeress of output in tye absence of/control totals,
In
thesesituations it will often be necessary to employ computer assisted audit
techniques.
Use of computers within the audit
A
microcomputer may be used by auditors in the following ways to assist in audit
Work.
Flowcharting client's systems
Specialist flowcharting packages can assist the auditor in the
well preseted production of clear,
flowcharts. Although the package cannot review the system for the
auditor, it does produce legible output and can be easily updated when systems
unlike manualy change,
producedflowcharts.
Axalytical procedures
A standard
template can be set
the auditor inputs key upon a
spreadsheet package. Onto this template,
detail_
The spreadsheet then calculates
such as balance sheet
totals from the
key accounting ratics to assist the financial statements.
analytical procedures. auditor
with the
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*******
*****
23-COMPUTERAUDIT
Preparation of audit working papers
Where a computer is available to
audit staff at the client's
totype up audit working premises, it can be used
papers. Audit documents with a lot of
and summaries of tests, will benefit from being writing, such as memos
and to a higher standard of produced more quickly on the computer
legibility.
Software
Commercialy available packages
Most audit firms
will purchase at least one word processor
spreadsheet package. These package and
programs will then be used as outlined
one
by the
accounting system
auditor
operation of the enterprise's computerfor computer processing to test the
There are other more
complex techniques, whichprograms.
will be considered later in this
The advantages of CAATs section.
to the auditor
In a
computer-based system the large volume of
the auditor to rely upon
programmed controls. CAATs are transactions is likely to
force
effective way of testing programmed controls. likely to be only
the
The use ofCAATs will enable
auditórs to.test a much
quickly and accurately, and therefore larger number of items
opinion. increase the confidence they have in
their
273
S
23- COMPUTER AUDIT
CAAlS enable auditors to test the' accounting system and its records (1.e. the
tapes and disk files) rather than relying on testing printouts ofwhat they believe to
be a copy of those
records.
Once set up, CAATs are.likely to be a cost effective
way of obtaining audit
eVidence provided that the enterprise does not regularly change its systems.
Careful planning by auditors should enable the results oftheir work using CAAIS
to be
compared with results from the traditional clerical audit work to increase
confidence.
Audit soitware
Types of audit software
Auditsoftware comprises computer programs used by auditors to examine
an
enterprise's computer files. It may consist of generalised package programs,
purpose- written programs or utility programs used by the client.
a.
Generalised package programs ' ^
These are programs already written either by the auditor or a specialist software
company, designed to be used on different types of machine. They need to be tailored to
each specific case by defining the format
of the files to be interrogated and by specifying
the parameters of output data required and the form of that output. In some cases
supplementary program coding'is required.
b. Specially written programs
Ih some cases it is not
possible to adapt a package program because of the type of
machine, processing or file organisation used. In such cases
apurpose-written program is
required. It could be written by the auditor, by a software specialist or by the client
on the instructions of the auditor. In all acting
cases it should be fully tested before
live' being used
C.
Utility programs
These are used by the entity to perform common data
sortingand printing files. For example, when using a terminal, processing functions such as
it
existing'enquiry programs to refer to data held on files, or to obtainisa necessary to use the
a
file.anary cases, however, the client's own print-out of parts of
needed by the auditor. It is likely that team programs 'will not provide all the facilities
the
programs produced the rest of the system andresponsible
for
writing enquiry the
there is therefore a
defects apply to all such
programs in the system.
danger that the same
Use of àudit softwure
Audit software may be used
during audit testing
particularly appropriate during substantivemany
testing
procedures. Its use is
scrutinise large volumes of data and of transactions and balances, as it can
to concentrate extract information, leaving skilled manual resources
upon the investigation of
Typical uses of such programs include: the results.
calculation checks e.g. the
-
e.g. obtaining a
stratified sample ledger of sales
balances to be used as a basis for a
circularisation of accoúis receivable
completeness checks- e.g. checking continuity of sales invoices
to ensure they
are all accounted for.
275
7241
DnpgA
façilitieS and
to describe thos
Aucdit Trail is a tern used
accounting system to be traced tnroug
a computer-based individu:l transactions to
r a i l in system, which enable evidence may not be,
available
within the vjsible by.foloWig ne
evIdence generated conclusion. In such a system,
time. However,
trom"origination to available for a short ne
ystem evidence may þe t r a n s a c t i o n s proçessea,
Some transactions or the documents re'sed for the
support auditor is able to
ascertain the
e activities.
auat
trall, the controls executed,
and the sequence
of il sales order torms,
records updated, the
systm will,
comprise the the
sales acçounting Cash Books and
the audit trail within the
Book, Sales Ledger,
Day
or example, Notes, Sales invoices, Credit Notes/Sales
00ds Delivgry others.
Bank Statements among
of
Facturs Casingless loss
Audit Trai
include the follow ng
of audit trial
caLuse befure input into the computer.
aciors tnat may evidence of data
oi documentary
() Noi-preparation after processing proce_sed,
Non-retention of s o u r c e documents
order different fror that in which they were procedures
ii) of source
documents in an
ution of pragram processing
(iii) Filling evidence for the ex:
of documentary
Non-production
(IV e x : : u t i o n of program
controls.
by the computer. evidence for the
documentary
Non-production of and records during updating.
non-production of
printed
(V) computerfiles in the
The overwriing of device, which results
(vi). of moriitor as
the only output
The use restricted to
(vii) computar output.. which a r e
ften
are
i1ot detailed but
computer output,
Inacequate printed
(vii) and summaries. M nagament.
exception reports output after
use oy
to printed computer terminals in real time systems.
Non-jetention
(ix) data with remote
Capturing of input
(X)
Procedures'tuovercome problerns trajl'are:
problems
caused by loss of audit stage.
the systens developmen
overcome
Steps ta take to be involved during retain
The auditoi needs to financial year, to
() date during the
Management, at an, caly that have audit
should request the audit, whwe reports
The 2uditor reports for the
purpose oi
computer-generated
the client's Sjitem. the output
routinely produced by iually calculate
compuier input data,
ma
clevance are
reconstruct the
i) The'auditor may clerically computergeneraterl utput, where prat cable. third party
thes with the 'alteriative audit
procedes, such as
and compare
p!ace gre åter emphesis on balances s a m e a n s of obtaining
The auditor may generated
(iv) verifiçation of computer
confimation and ph /sical
such
audit evidence. A.ssisted Auditing
Tec iniques (CAATs)
need to mäke use of Computer
The auditor may data packsS.
programs and test
(V e n s u i e that audit
tests are
as computer aydjt au:lit visits so as to
increase the frequency of his
The auditor may are proc:ssed.
(vi) the time transactions d so as to obtain
performed closa to review procedures perfori
increase thhe level of analytical
(vi) The auditor may generated balances
are r 2 a s o n a b l e .
a s s u r a n c e that computer
* -hasc i g SysGN
udii Fai!
G aCcouii SyStems.
295