EDP Environment Dr. S. Jerome Dept. of Commerce, Shift – II St. Joseph’s College (Autonomous) Tiruchirappalli -620002

BENEFIT OF COMPUTERIZED AUDIT 1) Speed : the work of recording of transactions , preparation of books , accounts can be done with greater speed. 2) Greater accuracy : the chances of arithmetical errors and human errors are reduced to minimum. 3) Greater economy: under the mechanized accounting system, work can be done with minimum staff, with minimum cost. 4) Better records: records prepared by machines are neat and clean. It is more legible, systematic and uniform. 5) Greater information : various types of information and statistical data regarding the operation of the business can be easily collected.

6) Interim accounts : interim accounts can be prepared without delay 6) Interim accounts : interim accounts can be prepared without delay. This will help the management to declare interim dividend. 7) Analysis of data : once the basic information is feed into the computers, it can be sorted in many different ways to provide analysis of statement . 8) Avoid overtime : the work of accounts are done quickly , the accounts can be prepared without any loss of time. 9) Reduction in audit fee: the work load of audit works is reduced by the computers. Hence the computerized audit reduces audit cost.

BENEFIT OF COMPUTERIZED AUDIT 10) Computerized audit reduces the monotony of audit work 11) Computerized audit enhances the reliability of audit 12) Computerized audit ensures flexibility in the audit programme. 13)Computerized audit is helpful for the smooth functioning of auditing

PROBLEMS OR DISADVANTAGES 1) It is not suitable for small business forms. 2) Difficulties to detect the errors and frauds. 3) Absence of supporting vouchers. 4) Storage problem 5) Computer frauds and computer virus. 6) Easy to make alterations 7) It creates unemployment. 8) Absence of input documents. 9) Lack of visible output 10) Coding problem.

AUDIT APPROACHES IN AN EDP ENVIRONMENT There are three approaches to auditing in an EDP environment . They are Auditing around the computer Auditing with the computer Auditing through the computer

AUDITING AROUND THE COMPUTER Auditing around the computer is an audit approach under which an auditor carries out the audit in the same way as in a traditional or Manual system except that, instead of examining hand written books, he examines computer printouts.

Auditing with computers: - under this approach, the auditor does the audit work with the help of computers that is general software. Under this approach, audit work is carried on in an traditional manner, but the computer software is used for certain operations.

Auditing through the computer Auditing through the computer means making use of computer in auditing. Under this approach the auditor evaluates the internal control relating to EDP and on the basis of evaluation , he determines the nature , timing , and extent of his sustentative procedures.

INTERNAL CONTROL UNDER AN EDP ENVIRONMENT For the control of various problems connected with the installation and operation of computers in accounting and auditing, there should exist an adequate and satisfactory internal control system in the undertaking . The internal control system should be reliable , effective, and should provide timely , authorized and required data from the system. The various internal controls required to be enforced under an EDP environment may be broadly classified into two categories.

EDP environment They are, 1) General EDP controls 2) EDP application controls

GENERAL EDP CONTROLS. The purpose of general EDP control is to establish a frame work of overall control over EDP activities. Some of the important general EDP controls are, Division of responsibility or duties. Control over development and maintenance of software Control over operators. Control over data access and program access. Control over editing of data. Storage control. Hardware control.

EDP APPLICATION CONTROL For the smooth working of EDP system, besides the general EDP controls, there should certain special EDP application controls. The important EDP application controls are 1) Control over input 2) Control over processing 3) Output control