EDP Environment

Dr. S. Jerome
Dept. of Commerce, Shift – II
St. Joseph’s College (Autonomous)
Tiruchirappalli -620002
BENEFIT OF COMPUTERIZED AUDIT
1) Speed : the work of recording of transactions , preparation of books
, accounts can be done with greater speed.

2) Greater accuracy : the chances of arithmetical errors and human

errors are reduced to minimum.

3) Greater economy: under the mechanized accounting system, work

can be done with minimum staff, with minimum cost.

4) Better records: records prepared by machines are neat and clean.

It is more legible, systematic and uniform.

5) Greater information : various types of information and statistical

data regarding the operation of the business can be easily collected.
6) Interim accounts : interim accounts can be prepared
without delay. This will help the management to declare
interim dividend.

7) Analysis of data : once the basic information is feed into the

computers, it can be sorted in many different ways to provide
analysis of statement .

8) Avoid overtime : the work of accounts are done quickly , the

accounts can be prepared without any loss of time.

9) Reduction in audit fee: the work load of audit works is

reduced by the computers. Hence the computerized audit
reduces audit cost.
BENEFIT OF COMPUTERIZED
AUDIT
10) Computerized audit reduces the monotony of audit
work

11) Computerized audit enhances the reliability of audit

12) Computerized audit ensures flexibility in the audit

programme.

13)Computerized audit is helpful for the smooth functioning

of auditing
PROBLEMS OR DISADVANTAGES
1) It is not suitable for small business forms.
2) Difficulties to detect the errors and frauds.
3) Absence of supporting vouchers.
4) Storage problem
5) Computer frauds and computer virus.
6) Easy to make alterations
7) It creates unemployment.
8) Absence of input documents.
9) Lack of visible output
10) Coding problem.
AUDIT APPROACHES IN AN EDP
ENVIRONMENT
There are three approaches to auditing in an
EDP environment . They are

1) Auditing around the computer

2) Auditing with the computer

3) Auditing through the computer

AUDITING AROUND THE
COMPUTER
Auditing around the computer is an audit
approach under which an auditor carries out the
audit in the same way as in a traditional or Manual
system except that, instead of examining hand
written books, he examines computer printouts.
Auditing with computers: -
 under this approach, the auditor does the audit work

with the help of computers that is general software.

Under this approach, audit work is carried on in an
traditional manner, but the computer software is
used for certain operations.
Auditing through the computer
Auditing through the computer means making
use of computer in auditing. Under this approach the
auditor evaluates the internal control relating to EDP
and on the basis of evaluation , he determines the
nature , timing , and extent of his sustentative
procedures.
INTERNAL CONTROL UNDER AN
EDP ENVIRONMENT
For the control of various problems connected with
the installation and operation of computers in accounting
and auditing, there should exist an adequate and
satisfactory internal control system in the undertaking .
The internal control system should be reliable , effective,
and should provide timely , authorized and required data
from the system. The various internal controls required to
be enforced under an EDP environment may be broadly
classified into two categories.
EDP environment
They are,
1) General EDP controls
2) EDP application controls
GENERAL EDP CONTROLS.
The purpose of general EDP control is to establish a
frame work of overall control over EDP activities. Some
of the important general EDP controls are,

1) Division of responsibility or duties.

2) Control over development and maintenance of software

3) Control over operators.

4) Control over data access and program access.

5) Control over editing of data.

6) Storage control.

7) Hardware control.
EDP APPLICATION CONTROL
For the smooth working of EDP system,
besides the general EDP controls, there should
certain special EDP application controls. The
important EDP application controls are

1) Control over input

2) Control over processing

3) Output control