Chapter 13
Auditing Information Technology
Presentation Outline
I.
II.
Concepts in Information Systems
Auditing
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 testing
4. Analysis and reporting of
results
B. Structure of the Financial
Statement Audit
Transactions
Accounting
System
Interim Audit
Compliance Testing
Financial
Reports
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. Mapping
H. 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 computerprocessed output with the manually processed
results.
Illustration of Test Data
Approach
Computer Operations
Auditors
Prepare Test
Transactions
And Results
Transaction
Test Data
Computer
Application
System
Computer
Output
Auditor Compares
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
Computer Operations
Actual
Transactions
Prepare ITF
Transactions
And Results
ITF
Transactions
Computer
Application
System
Reports
With Only
Actual Data
Auditors
Data Files
ITF Data
Reports
With Only
ITF Data
Auditor
Compares
Manually
Processed
Results
D. Parallel Simulation
The 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 Simulation
Computer Operations
Auditors
Actual
Transactions
Computer
Application
System
Actual Client
Report
Auditor’s
Simulation
Program
Auditor Compares
Auditor
Simulation
Report
E. Audit Software
Computer 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 Routines
1. In-line Code – Application program performs
audit data collection while it processes data
for normal production purposes.
2. System Control Audit
Review File (SCARF)–
The Auditor
Edit tests for audit
transaction analysis are
included in program.
Exceptions are written
to a file for audit review.
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 Records
Specific 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.
Snapshot
A snapshot is similar to
an extended record
except that the
snapshot is a printed
audit trail.
Summary
Compliance and Substantive Testing
Auditing Around the Computer
Auditing with the Computer
Auditing Through the Computer
Testing Approaches Through the Computer