Auditing Application Controls
Module 6 Chapter 3
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Task Statement
•1.2 Assess business processes - risks
assessment and control evaluation in
the context of business strategy, impact
of business application software on
Business processes/controls
Part 1: Audit Program for planning and perform review of
application software:
Part 2: Business application software controls analysis.
through analytical procedures, compliance testing and
substantive testing
Part 3:Impact of Business application software on Business
processes / controls, redefining the business processes, as
per need of application software.
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Part 4: User Controls
Part 5: Database controls
Part 6:Information systems, financial reporting and
regulatory requirement
Part 7: System Audit Report format as per best practices
systems, financial reporting and regulatory requirement
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CASE STUDY
• Module 7
• Chapter 3
• Part 1
Objective
Agenda
Test Data
• To learn about continuous
audit approach.
• To learn how Integrated
Audit Technique Works
• None separately.
INTEGRATED TEST FACILITY(ITF)
AUDIT TECHNIQUE
INTRODUCTION
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Meaning of Integrated Test Facility
Integrated test facility (ITF) is a system in
which a test pack is pushed through the
production system affecting “dummy” entities.
Requirements
This requires dummy entities to be created in the
production software.
For example, the auditor would introduce test transactions
that affect targeting dummy customer accounts and
dummy items created earlier for this testing purpose.
Advantages or Importance of ITF
ITF is useful in identifying errors
and problems that occur in the
live environment and that cannot
be traced in the test environment.
Disadvantage of ITF
The disadvantage in using ITF is
that the dummy
transactions also append to the live
database and hence will impact the
results and reports drawn from
the live database.
Result
As with test pack, the output
produced is
compared with predicted results.
This helps
to determine whether the
programmed procedures
being tested are operating
correctly.
The Store Purchase Flowcharts(TSPF)
ISSUE SLIP
entered
STORES:
Processing of Issue
Slips reduces
Inventory level to
Reorder level(ROL)
Triggers an Action:
Intimates the Purchase
Dept.
PURCHASE
Generates a
Purchase Order for
EOQ/ROQ
PO to Vendor
The Store Purchase Flowcharts(TSPF)
Step 1(figure 1) : Sources Document: Issue slip captured in stores
system.
Step 2(figure 2) : Stores issue stock based on Issue slip. The result
being reduced inventory level. An items level hits re-order
level(ROL). The level at which Purchase Order are processed.
The Store Purchase Flowcharts(TSPF)
Step 3(figure 3) : Items has hit ROL, this is intimated to Purchase
Department.
Step 4(figure 4) : Purchase department, creates a PO(Purchase Order)
for Re-order Quantity/ Economic Order Quantity(ROQ/EOQ).
Step 5(figure 5) : PO sent to Vendor.
Conclusion
From these Integrated Test Facility(ITF) system ,
we determine whether the Programmed Procedures
are being correctly Operated or not and it is useful in
identifying errors and problems that occur in the Live
environment.