COMPUTERIZED AUDIT SYSTEM: ISSUES, PROBLEMS AND PROSPECTS

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Computerized Auditing System: A computer is an electronic device, which works faster than the ordinary human brain. Although a computer has no brain of its own to reason like a human being, it has in-built memories that enable it perform complex mathematical problems as fast as possible, faster than the human brain. The background of computing aids can be traced to China where merchants first made use of ABACUS, while the history of modern day computers is traced to French where Pascal in 1642 invented the First Machine for doing the four fundamental operations of arithmetic in money. This was improved upon by Hervrith in 1671 and recommended for use in the large volume of astronomical calculations required at that time. The first analoque computer was derived from Kelvin Tidal analysis for producing tides.

Since the first office computer LED Ilyans end co-electronic Office was introduced in 1953, machine have increased on speed, reliability and new used in wide range of application without any change in the fundamental principles. The introduction of computer has made accounting such as auditing easier and quicker to perform. The computer is capable of performing a months transaction of auditing work of an organization in a few hours thus reducing the job of the Auditor.

This auditor need to learn about computer programming or at least should be able to follow the transaction trail up to the paint where they are keyed into the computer in form of input since there is usually a Loss of Visible Evidence (LOVE) during operation. The Auditor should be able to relate the input to output. It is also advisable for an Auditor to take a course in computer programming in output data in course of his audit trail.

The fast developing of technology, paper transactions are fast disappearing, consequently, source documents are less available. The introduction and adoption of computer to the Auditor business has led to revolution in data processing methods. They have served as a catalyst to auditing world in the area of efficient, effectiveness, timely and accurate operation of business.

From the foregoing, computerized audit as a way of checking the efficiency and accuracy of data procedures present a fascinating study.

An audit is an independent or objective examination of the financial statement of an entity and the expression of an opinion. It could be inferred that the primary reason of conducting an audit is to enable the Auditor make a report to the effect that the financial statement as prepared by officers of an establishment gives a true and fair view, otherwise to what extent they disagree with the report.

The auditor along side help to ascertain compliance of the organization to operational policies and prescribed standard. This is aimed at increasing the acceptability, dependability and usefulness of financial statement.

STATEMENT OF THE PROBLEM

The research will be concerned with the problems faced by auditors and will offer solution to them. Those problems are:

1. Complexity of the computer systems
2. Non-existence of visible evidence
3. Possibility of systematic errors
4. Non retention of files and data
5. Lack of audit trail. The tracing of individual transaction through the system from source to completion.

HYPOTHESIS

Hi:     A computerized accounting has a significant influence on the auditor

Ho:    A computerized accounting system has no significant influence on the auditor.

RESEARCH QUESTION

In line with the above purpose of the study some questions are design to enable the research address the issue. These questions are:

1. What are the causes of the problem in computerized system of auditing?
2. How will the auditor carry out his auditing functions in a computerized system?
3. What are the impacts of computerized system and the Auditor function
4. Is there any need for Auditors in a computerized system
5. Would it be easy for Auditors to detect computer fraud using computerized system?
6. How would the computer system influence opinion of Auditors?
7. Are Auditors function affected by the use of computers?

1. OBJECTIVE OF THE STUDY

The purpose of the research is as follows:

1. To examine the advantages of audit
2. To examine the computer audit
3. To examine the responsibilities of Auditors in a computerized environment.
4. To access the computerized procedure in Akintola Williams Deloitte and see how they combat fraud and errors.

SCOPE OF THE STUDY

This research work is conducted with computerized audit approach as it is obtained at Akintola Williams Deloitte. It also emphasizes on the assessment of computerized procedure in achieving effectiveness and efficiency in audit operations. Included is the analysis of the problems associated with the new computerized system of auditing firms in relation to its effects in the operation of the firms.

SIGNIFICANCE OF THE STUDY

The significance of the study is derived from the impact of computerized auditing system and also the value ascribed to it by the society.

The study has a significant impact on auditors.

Impact on Auditors

It will consider computerized auditing system, records auditing system, records and accurate way of applying computer in keeping records in Akintola Williams Deloitte Abuja.

The decision makers will also immensely from the appropriate information would be available for decision making and planning.

The researcher will also find the significance of the project in their quest for knowledge and also as a useful contribution to their field of study.

DELIMITATIONS

In the past, auditing of public and private organization have been carried out by the conversational method making it time consuming and problems encountered led to the development of computerized audit, thus helping to overcome the shortcomings of the conventional method. The computerized auditing system however, created its own problems which hinders the Auditor from discharging his responsibilities. The research will try to address these problems. The research may not provide absolute solution for these problems but will try to reduce some likely errors which may be created or affect the Auditor during audit work in a computerized environment.

The delimiting factors affecting the full coverage of this are:

1. Data collection for research is not easy
2. Other problems include financial handicap because research work demand more funds than one could afford.
3. Lack of relevant books on the topic and other periodical materials.
4. Time constraint

Nevertheless, much will be done on the work despite these constraints.

DEFINITION OF TERMS

To accomplish the objective and aim of this work, it is therefore necessary that some terms used in the study be defined as this work enhances the understanding of the reader.

i)       Internal Control: Atwood and Staris (1986) defined internal control in the auditing guideline on the subject as the whole system of control, financial and otherwise established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, to ensure adherence for management policies, safeguard the assets and secure as afar as possible the completeness and accuracy of records.

ii)      Processing: This refers to the calculation that are performed on the data to get the output.

iii)     Data: These are raw factors and figures collected for further processing meant to help solve a given problem.

iv)     Audit Query: This is a question raised and issued whenever the Auditor is in doubt about the truth of stated matters in the record.

1. Computer Audit: [Howard L.R. 1992] states that it is an approach, which embraces review of application in terms of general controls and installation controls (i.e. input control, processing control and output control).
2. Worms: This is a program that replicates but has no trigger event. It usually does not damage file integrity, but ties-up computer resources by having the computer file storage media consume available computer memory, thus stopping operation.