Presentation Outline
I. Concepts in Information Systems Auditing
II. Auditing Technology for Information Systems
I. Concepts in Information Systems Auditing
A. The Phases to the Information Systems Audit
B. Structure of the Financial Statement Audit C. Auditing Around the Computer
D. Auditing With the Computer E. Auditing Through the Computer
A. Phases of the Information Systems Audit
1. Initial review and evaluation of the area to be audited, and the audit plan preparation
2. Detailed review and evaluation of controls
3. Compliance testing4. Analysis and reporting of
results
B. Structure of the Financial Statement Audit
Transactions AccountingSystem
FinancialReports
Interim Audit
Compliance Testing
Financial Statement Audit
Substantive Testing
B1. Compliance Testing
Auditors perform tests of controls to determine that the control policies, practices, and
procedures established by management are functioning as planned. This is known as
compliance testing.
B2. Substantive Testing
Substantive testing is the direct verification of financial statement figures. Examples would
include reconciling a bank account and confirming accounts receivable.
Audit Confirmation
To ABC Co. Customer:
Please confirm that the balance of your account
on Dec. 31 is _____ .
C. Auditing Around the Computer
The auditor ignores computer processing. Instead, the auditor selects source documents that have been input into the system and summarizes them manually to see if they match the output of
computer processing.
Processing
D. Auditing With The Computer
The utilization of the computer by an auditor to perform some audit work that would otherwise
have to be done manually.
E. Auditing Through the Computer
The process of reviewing and evaluating the internal controls in an electronic data
processing system.
Audit
II. Auditing Technology for Information Systems
A. Review of Systems Documentation B. Test Data
C. Integrated-Test-Facility (ITF) Approach D. Parallel Simulation
E. Audit Software F. Embedded Audit Routines
G. MappingH. Extended Records and Snapshots
A. Review of Systems Documentation
The auditor reviews documentation such as narrative descriptions, flowcharts, and program listings. In desk checking the auditor processes
test or real data through the program logic.
B. Test Data
The auditor prepares input containing both valid and invalid data. Prior to processing the test
data, the input is manually processed to determine what the output should look like.
The auditor then compares the computer-processed output with the manually processed
results.
Illustration of Test Data Approach
Computer Operations
Prepare TestTransactionsAnd Results
Auditors
ComputerApplication
System
ComputerOutput
Auditor Compares
TransactionTest Data
Manually Processed
Results
C. Integrated Test Facility (ITF) Approach
A common form of an ITF is as follows:1. A dummy ITF center is created for the auditors.2. Auditors create transactions for controls they
want to test.3. Working papers are created to show expected
results from manually processed information.4. Auditor transactions are run with actual
transactions.5. Auditors compare ITF results to working papers.
Illustration of ITF Approach
ComputerApplication
System
ReportsWith Only Actual Data
AuditorsComputer Operations
Prepare ITFTransactionsAnd Results
ActualTransactions
ITFTransactions
Data FilesITF Data
ReportsWith Only ITF Data
Manually Processed
ResultsAuditor
Compares
D. Parallel SimulationThe test data and ITF methods both process test
data through real programs. With parallel simulation, the auditor processes real client data
on an audit program similar to some aspect of the client’s program. The auditor compares the
results of this processing with the results of the processing done by the client’s program.
Illustration of Parallel SimulationComputer Operations Auditors
ActualTransactions
ComputerApplication
System
Auditor’sSimulationProgram
Actual ClientReport
Auditor Simulation
Report
Auditor Compares
E. Audit SoftwareComputer programs that permit computers to be
used as auditing tools include:1. Generalized audit software
Perform tasks such as selecting sample data from file, checking computations, and searching files for unusual items.
2. P.C. Software Allows auditors to analyze data from
notebook computers in the field.
F. Embedded Audit Routines1. In-line Code – Application program performs audit data collection while it processes data
for normal production purposes.2. System Control Audit Review File (SCARF)– Edit tests for audit transaction analysis are included in program. Exceptions are written to a file for audit review.
The Auditor
G. Mapping
Special software counts the number of times each program statement in a program executes.
Helps identify code that is bypassed when the bypass is not readily apparent in the program code
and/or documentation.
H. Extended Records and Snapshots
Extended RecordsSpecific transactions are
tagged, and the intervening
processing steps that normally would not
be saved are added to the extended record, permitting the audit
trail to be reconstructed for
these transactions.
SnapshotA snapshot is similar to an extended record
except that the snapshot is a printed audit trail.