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Audit in CIS - Introduction

The document discusses the audit environment in a Computerized Information System (CIS). It defines CIS as when an organization uses computers to process accounting records and prepare financial statements. The key aspects of a CIS audit environment include the infrastructure of hardware, software and applications used; the lack of physical documents and visible transaction trails; uniform processing of transactions; concentration of information processing among few individuals; automatic execution of some transactions; analytical tools for review and supervision; and effective management supervision enabled by CIS. The document also outlines some uses of computers for auditing like more reliable processing if programs account for all scenarios, built-in control procedures, and automatic updating across relevant files for a transaction.

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Ortiz, Trisha Mae S.
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79 views

Audit in CIS - Introduction

The document discusses the audit environment in a Computerized Information System (CIS). It defines CIS as when an organization uses computers to process accounting records and prepare financial statements. The key aspects of a CIS audit environment include the infrastructure of hardware, software and applications used; the lack of physical documents and visible transaction trails; uniform processing of transactions; concentration of information processing among few individuals; automatic execution of some transactions; analytical tools for review and supervision; and effective management supervision enabled by CIS. The document also outlines some uses of computers for auditing like more reliable processing if programs account for all scenarios, built-in control procedures, and automatic updating across relevant files for a transaction.

Uploaded by

Ortiz, Trisha Mae S.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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AUDIT IN CIS ENVIRONMENT

What is meant by Computerised Information System (CIS) ?

Introduction :

Nowadays, there is growing use of computers in business organisations for storage and
processing of accounting records and other information. This has revolutionized the
functioning of the organisation, its accounting and administrative controls, flow of
information and preparation of financial statements. As a result, the auditor has to acquire
adequate knowledge of computer-based accounting system to perform his job.

Meaning of Computerised Information System (CIS) Audit Environment :

Auditing in Computer Information System (CIS), environment, the CIS or EDP exists
when any organisation uses one or more computer(s) of any type or size for preparation
of financial statements. A client has Computer Information System (CIS) or Electronic
Data Processing (EDP), when there is computerization of his accounts. It is immaterial
whether the staff of the client himself does the processing and generation of financial
statements on computers or an outside agency.
The Computer Information System (CIS) does not change the objective and scope of an
audit, but it certainly changes the way of processing, storage, retrieval and
communication of financial information.

Features of Computer Information System (CIS) Audit Environment :


The features of Computer Information System (CIS) Audit environment are explained
below:

1) Computer Information System (CIS) Infrastructure


Computer Information System (CIS) infrastructure includes hardware like CPU, monitor,
printer and keyboard. It also includes operating systems. These may be Windows,
Microsoft (MS) Office, Disc Operating System (DOS). LINUX, etc. They oversee the
communication of data between the computer processor and its magnetic discs, as well as
the management of files and programmes on the discs. Application software is a set of all
computer programmes such as Tally, which is a specially developed Accounting
Software, including operating system, compilers, packages and user programmes which
enable a particular computer centre to operate.

2) Lack of Documents and Transaction Trail:


In manual accounting, there is a transaction trail. First, a document originates a
transaction. Then, there is entry of the transaction in the original books of account.
Thereafter, there is posting of the transaction in the principal books. Lastly, the net effect
of transactions reflects in financial statements.
AUDIT IN CIS ENVIRONMENT

In Computer Information System (CIS), on the other hand, there are often no transaction
creating documents and no visible transaction trail. For example if there is direct feeding
of data into the computer, there may not be any physical input documents e.g. voucher,
invoice, receipt, etc. and no transaction trail. Therefore, to assess how Computer
Information System (ClS) may influence the audit examination process, he should
consider the availability of data (a) entered in computer (b) retained in data files and (c)
generated for outputs. The data may be available only in machine-readable form and
accessible only for a brief period. In such a case, the auditor needs to request the client to
retain particular data for examination. This is because invisibility of information is likely
to increase the possibility of hidden errors as compared to manual system where such
errors are visible.

3) Uniform Processing
Under computer processing,. there is uniform processing of similar transactions with
same processing instructions or programme. This decreases the risk of human errors like
calculation mistakes but programming error may result in incorrect processing of all
transactions.

4) Concentration of Processing of Information:


In Computer Information System (CIS) environment, only a small number of persons
process the entire information. As against this, in the manual system, there is division of
the same work among several persons. As a result, customary controls based on
segregation of diverse functions may be absent or ineffective. Further, persons operating
the Computer Information System (CIS) systems achieve expertise as regards the sources
of data, manner of processing, and generation and distribution of output.

5) Automatic Execution of Transactions


Under Computer Information System (CIS), there is automatic execution of certain
transactions. As a result, there may not be generation of any documents for such
transaction.

6) Analytical Tools
Computer Information System (CIS) generates a variety of analytical tools. These may be
useful in reviewing and supervising the operations of the client. These will also go to
improve the internal control structure.

7) Effective Supervision
Computer Information System (CIS) enables management to enforce effective
supervision over operations. Analytical tools of Computer Information System (CIS) only
go to make this easier. The Auditor can apply computerised auditing tools to ensure audit
efficiency. EDP systems contain built-in software and hardware controls that are more
effective than manual controls.
AUDIT IN CIS ENVIRONMENT

Uses of Computers for Auditing Purposes :

Computer is used in auditing procedure. They work to the advantage of auditing in the
following ways:

1) More Reliable
A computer works as programmed. If the programming has taken into account all
possible circumstances, the computer will work more reliably and consistently than the
manual system. In manual system, the auditor may undertake detailed checking of a
number of transactions, yet certain errors and fraud may remain undiscovered. It is not so
in the Computer Information System (CIS) environment. The auditor has only to see
whether there is effective international control on programme and, if so, checking of
certain significant or unusual transactions will ensure accuracy in accounting.

2) In-built Control Procedure


With built-in automatic control procedures, the EDP systems will themselves indicate
certain unusual or significant transactions such as, overdue payments, falling of inventory
levels below the prescribed levels, etc. In manual system, the auditor will have to make
extra efforts for the purpose. Prescription of 'password' control in computer will secure
the data against access by unauthorized persons. In manual system, there is always
possibility of unauthorized access to accounts.

3) Automatic Updating:
Computers facilitate automatic updating of all relevant computer files by a single
transaction. For example, purchase of raw materials from a single supplier will update the
accounts of the supplier, purchases and inventory. In manual system, different individuals
will need to update the relevant files under their charge. Likewise, with proper
programming, certain tasks can be performed without human intervention. For example
generation of monthly accounts in case of customers will remove the need for manual
preparation of accounts in individual cases.

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