A short 2 page summary with an introduction to auditing in the context of information systems for the INFO2006 course.
This summary provides brief points with everything you need to know.
These notes highlight the most important parts of the notes provided by the lecturer.
Introduction to Auditing
1. Auditing Introduction
The audit is an intelligent and critical examination of the books of the business.
Done by the independent person or body of persons qualified for the job with the help of statements, papers, information, and comments received from the authorities
so that the examiner can confirm the authenticity of financial accounts prepared for a fixed term and report that:
o The balance sheet exhibits an accurate and fair view of the state of affairs of concern.
o The profit and loss accounts reveal the right and balanced view of the profit and loss for the financial period.
o The accounts have been prepared in conformity with the law.
2. Meaning of Auditing
The term audit is derived from the Latin word “audire” - means to hear the authenticity of accounts is assured with the help of an independent review.
The audit is performed to ascertain the validity and reliability of the information.
Examination of books and accounts to detect and prevent error, and fraud is the primary function of auditing.
The auditor must check the effectiveness of internal control systems.
In short, an audit implies an investigation and a report.
The process of checking and vouching continues until the study is completed and the auditor enables himself to report under the terms of his appointment.
3. Techniques of Auditing 4. Scope of Auditing
Visible verification of assets. Auditing is used to verify true financial statements.
Verification and analysis of transactions with available pieces of Main objective - to guarantee the clarity of financial statements and to
evidence. expose errors and fraud.
Inspection of the books. While audits are an excellent tool to provide independent, objective
Checking past profits and losses. feedback about a process or organization, they often only provide
point-in-time snapshots.
5. Defining Auditing and Continuous Auditing
Continuous auditing is the audit-related activities that are done more continuously than activities scheduled as part of the annual audit plan. (Institute of Internal
Auditors)
The annual audit plan is a schedule of audits planned for any given year, but continuous auditing is frequently mining, reviewing, and assessing information, typically with
the help of technology.
5.1 Continuous Auditing Techniques
Continuous auditing has the same objective as traditional auditing, which is to identify weaknesses in processes and opportunities for improvement.
Continuous auditing cannot replace the judgment and discretion of an auditor who understands the context of processes and can think about how metrics, processes, and
assessments are related.
Three important techniques can be used with continuous auditing to significantly reduce the time it takes.
These techniques are not specific to continuous auditing and are some of the same tools and techniques auditors have used for years. But they can be easily and quickly
assessed with the help of technology.
o The first is a BINARY CHECK to determine whether a control is working effectively – e.g. a system check of whether something was done according to policy
or a predetermined requirement.
o The second technique is IDENTIFYING OUTLIERS - an outlier is a numerical value that is significantly different than one might expect.
o The third is using ANALYSIS SOFTWARE TO IDENTIFY TRENDS - the prior two look for isolated events, technology has made it quick and efficient to analyse
data, continuous auditing can keep track of
Continuous auditing would take the burden off organisations that go through one or more yearly audits.
A continuous audit involves the continuous monitoring of systems and collecting of data and evidence that is typically required in an assurance audit, spreading all that
time and workload throughout the year.
With more frequent check-ins with an assessor to provide evidence that internal controls are in place, mature, and functioning properly, a continuous audit may allow an
organisation to forego undergoing a traditional assurance audit for several years.
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