1 Topic# 7 – Auditing with Technology Readings, Chapter 10 A – COMPUTERIZED AUDIT TOOLS –Electronic Spreadsheets –Automated Working Papers –Generalized Audit Software –Database Management Systems –Digital Analysis –Text Retrieval Software –Public Database B – ELECTRONIC COMMERCE

2 Electronic Spreadsheets These are often included in generalized audit software and may be used for applications such as analytical procedures and performing mathematical procedures. Also, auditors often use microcomputer electronic spreadsheets (e.g. Lotus & Excel) to prepare working trial balances, lead, and other schedules.

3 Automated Working Papers Example: FAST LEADS

4 Generalized Audit Software Test client calculations Make additional calculations Extract data from the client files Examine records which meet criteria specified by the auditor (e.g. acquisitions in excess of $10,0000 Select audit samples Summarize data Print reports and various analyses

5 Compare data obtained through other procedures with client records Identify weaknesses in internal control Prepare flowcharts of client transactions cycles and of client programs Prepare graphic displays of data for easier analysis Generalized Audit Software (cont’d)

6 Database management software may be used to perform analytical procedures, mathematical calculations, generation of confirmation requests (e.g. debtors), and to prepare customized automated working papers. Eg: IDEA ACL AUDIT LEVERAGEAUDIT LEVERAGE Database Management Systems

7 Digital Analysis Utilizes Benford’s Law (Built in to ACL & IDEA) Digit1 st Digit Frequency2 nd Digit Frequency

8 Text Retrieval software These software allows an auditor to research technical issues quickly and requires minimal training.

9 Public Databases These may be used to obtain accounting information related to particular companies and industries as well as other publicly available information on, for example: - Electronic bulletin boards - Internet

10 B - ELECTRONIC COMMERCE - EC This involves individuals and organizations engaging in a variety of electronic transactions with computers and telecommunication networks

11 Associated Risks with EC a) Business Practices e.g. Is the web site reliable? Are returns handled properly? How about product warranties? Is this a valid sale ? Is this a computer hacker?

12 Associated Risks with EC (Cont’d) b) Transaction Integrity: without proper controls, electronic transactions and documents may be charged, lost, duplicated, or incorrectly processed. c) Information Protection: - consumers must have confidence that private information will be protected (e.g. security must be maintained over credit card numbers transmitted over the Internet)

13 WEBTRUST Developed jointly by: AICPA and the Canadian Institute of Chartered Accountants See more.

14 WEBTRUST Seal of assurance

15 WEBTRUST WEBTRUST PRINCIPLES INCLUDE: On-Line Privacy Security Business Practices and Transaction Integrity Availability WebTrust for Certification Authorities