Chapter - 5 Audit in CIS Environment.
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ScribdTranslationsChapter-5: Audit in Computerized Information
System (CIS) Environment
Question:1: Define CIS audit. What are the characteristics of CIS?
Answer: CIS audit is the process of auditing in a computerized environment. The overall objective
and scope of an audit does not change in a CIS environment. However, the use of a
The computer changes the processing, storage, and communication of financial information.
and may affect the accounting and internal control systems employed by the entity.
The characteristics of the computer information system (CIS) are as follows:
● Speed
A computer works with much higher speed and accuracy compared to humans while
performing mathematical calculations. Computers can process millions (1,000,000) of
instructions per second. The time taken by computers for their operations is
microseconds and nanoseconds.
● Accuracy
Computers perform calculations with 100% accuracy. Errors may occur due to data
inconsistency or inaccuracy.
● Diligence
A computer can perform millions of tasks or calculations with the same consistency and
accuracy. It doesn’t feel any fatigue or lack of concentration. Its memory also makes it
superior to that of human beings.
● Versatility
Versatility refers to the capability of a computer to perform different kinds of work with
same accuracy and efficiency.
● Reliability
A computer is reliable as it gives consistent results for similar sets of data, i.e., if we provide
Same set of input any number of times, we will get the same result.
● Automation
Computer performs all the tasks automatically i.e. it performs tasks without manual
intervention.
● Memory
A computer has built-in memory called primary memory (hard disk) where it stores data.
Secondary storage are removable devices such as CDs, pen drives, portable hard-disk.
etc., which are also used to store data.
What types of skills and competencies are needed for CIS audit?
Question:2:
Answer: The following skills and competence may be needed for CIS audit:
a. To obtain a sufficient understanding of the accounting and internal control systems
affected by the CIS environment;
b. To determine the effect of the CIS environment on the assessment of overall risk and of
risk at the account balance and class of transactions level; and
c. To design and perform appropriate tests of control and substantive procedures.
Question-3: Define CAATs (Computer Assisted Audit Techniques). Briefly explain its
advantages and disadvantages.
Computer Assisted Audit Techniques or CAATs can be defined as an auditing method/tool.
that uses computer software tools to query business data to produce reports that will enhance an audit.
Advantages of CAATs
CAATs allow the auditor to:
● Independently access the data stored on a computer system without dependence on the client;
● Test the reliability of client software, i.e. the IT application controls (the results of which can
then be used to assess control risk and design further audit procedures;
● Increase the accuracy of audit tests; and
● Perform audit tests more efficiently, which in the long term will result in a more cost-effective.
audit.
Disadvantages of CAATs
● CAATs can be expensive and time consuming to set up, the software must either be purchased
or designed (in which case specialist IT staff will be needed);
● Client permission and cooperation may be difficult to obtain;
● Potential incompatibility with the client's computer system;
● The audit team may not have sufficient IT skills and knowledge to create the complex data.
extracts and programming required;
● The audit team may not have the knowledge or training needed to understand the results of the
CAATs; and
● Data may be corrupted or lost during the application of CAATs.
Question-4: Is there any difference between audit in a manual system and audit in a Computer Information System (CIS)?
environment? Explain.
Answer:
Yes. There are some key differences between audit in a manual system and audit in a CIS environment.
Few points are as follows:
Lack of audit trail in computer generated data
In a manual system, the audit trail is fully visible because all ends of the transactions can be neatly and
clearly traced. Due to a deficit of input documents and storage of information inside the system, audit
The trail is less visible in the CIS audit.
Uniform processing of transactions
Computer processing uniformly processes like transactions with the same processing instructions.
Thus, the clerical errors ordinarily associated with manual processing are virtually eliminated.
Conversely, programming errors (or other systematic errors in hardware or software) ordinarily result
in all transactions being processed incorrectly.
(c)Lack of segregation of functions
Many control procedures that would ordinarily be performed by separate individuals in manual
systems may be concentrated in CIS. Thus, an individual who has access to computer program,
Processing or data may be in a position to perform incompatible functions.
Potential for errors and irregularities
The potential for human error in the development, maintenance and execution of CIS may be greater.
than in manual systems. Also, the potential for individuals to gain unauthorized access to data or to
alter data without visible evidence may be greater in CIS than in manual systems. Errors or
irregularities occurring during the design or modification of application program or systems software
can remain undetected for long periods of time.
Initiation or execution of transactions
CIS may include the capability to initiate or cause the execution of certain types of transactions.
automatically. The authorization of these transactions or procedures may not be documented in the
same way as those in a manual system, and management's authorization of these transactions may be
implicit in its acceptance of the design of the CIS and subsequent modification.
