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THE IMPACT OF COMPUTER IN AUDITING

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THE IMPACT OF COMPUTER IN AUDITING

 

 

INTRODUCTION TO AUDITING IN CHAPTER ONE
This chapter explains why auditing exists as a discipline. It begins by introducing the concept of stewardship accounting. The objectives of auditing are best explained by first learning about auditors’ reports and the organization of the Auditing profession.

The various types of audits are discussed in the final section of this chapter.

ACCOUNG FOR STEWARDSHIP

According to Kola Olowookere, stewardship accounting refers to accounts rendered by managers to business owners. Auditing evolved as a result of the stewardship account. Financial statements are commonly used for reporting and accounting. Balance sheet, profit and loss account, and cash flow statement are some examples.

Auditing can be defined in two ways: first, as a tool put in place by the ’s management to track the operation of the internal control system and whether or not it is strictly adhered to.

In other words, auditing is defined by The Consultative Council of Accountancy Bodies as the independent examination of an expression of opinion on an enterprise’s financial statements by an appointed auditor in accordance with that appointment and in compliance with any relevant statutory obligation.

 

AUDITORIAL EVIDE

The Consultative Committee of Accounting Bodies (CCAB) in the United Kingdom stated, among other things, in its auditing standard of April 1980:

 

“The auditor should obtain audit evidence that is relevant and reliable enough to allow him to draw reasonable conclusions.”

 

Audit evidence is information obtained and recorded by the Auditor in reaching the conclusions on which his opinion on the financial statements is based.

 

AUDITING OBJECTIVES

An audit’s primary goal is not to detect fraud, errors, or irregularities. The primary responsibility of the auditor is to produce a report of his opinion on the truth and fairness of financial statements so that anyone reading and using them can rely on them. The secondary goal, on the other hand, is to:

 

a) Detecting errors and fraud

 

(b) To avoid mistakes and fraud.

 

(c) To serve as a morale booster

 

(d) To express his point of view in a truthful and balanced manner.

 

(e) To ensure the internal control system’s dependability.

 

HYPOTHESES FOR RESEARCH

The following hypotheses will be developed for this study “The impact of computer in auditing” a case study of Tantalizer Fast Food Ikotun:

 

H1 Computerization has enabled employees to carry out their tasks and responsibilities in an effective, efficient, and timely manner in order to meet management demands.

 

Ho Computerization has not improved management effectiveness and efficiency.

 

H1 Computer has a positive effect on accounting personnel productivity in the accounting system.

 

Ho Computer has no positive effect on accounting personnel productivity in the accounting system.

 

Accounting personnel now have job opportunities thanks to H1 Computer.

 

Accounting personnel have been laid off as a result of Ho Computer.

 

OBTNING AUDIT EVIDE METHODS

The five methods of obtaining audit evidence, according to Kola Olowookere, are as follows:

 

(a) Inspection entails reviewing documents or physically inspecting records, documents, or tangible assets. The inspection of tangible assets provides the auditor with evidence of their existence but not of their ownership, cost, or value.

 

(b) Observation: Observation entails looking at an operation or procedure being performed by others in order to determine how it is performed. Observation provides reliable evidence for the manner of performance at the time of observation but not for any other time.

 

(c) Enquiry: This entails formally or informally seeking relevant information from knowledgeable individuals both inside and outside the organization (management, staff, solicitors, bankers, parent , valuers) orally or in writing. The auditor’s level of confidence in evidence obtained in this manner is determined by his assessment of the respondent’s competence, experience, independence, and integrity.

 

(d) Computation: Performing independent calculations or checking the accuracy of accounting records. The dependability is somewhat dependent on the accuracy of the underlying records.

 

(e) Analytical Review: This entails investigating any unusual or unexpected variations in significant ratios, trends, and other statistics. Analytical review provides validation evidence for audit procedures.

 

THE DIFFERENT KINDS OF AUDIT

(a) Statutory Audits: A statutory audit is one conducted by an independent auditor. This independent auditor is one who is not employed by the organization in any way that he considers appropriate and in accordance with the enabling statute. No restrictions may be imposed on the auditor in the performance of his statutory duties.

 

(b) Private Audit/Non-Statutory: A private audit is an independent audit that is performed because the owners want it rather than because the law requires it. Audits of sole traders, partnerships, sole proprietors, and unions are some examples.

 

(c) Interim Audit: An interim audit is one that is completed to a specific date within the accounting period, such as a quarter or a half-year. The interim audit is usually followed by the final audit at the end of the accounting period.

 

(d) Internal Audit: An internal audit is one conducted by a business employee into any aspect of the ’s operations. It is also an evaluation of the organization’s policies, plans, procedures, activities, and records by specially assigned personnel. It ensures that the organization’s internal control system is functioning properly.

 

(e) Final Audit: A final audit is a process that is completed in a single continuous session. Although it can begin before the end of the accounting period, it must be completed at least after the end of the accounting period.

 

COMPUTER INTRODUCTION

A computer is defined as a device that can accept data in the form of facts and figures, apply prescribed processes to the data, and output the result as meaningful information.

 

COMPUTER ANALOG (ANALOGUE)

These are computers that continuously vary, such as , speed, the chemical composition of petroleum products, or the amount of current flowing through an electrical conductor. They are used in a wide range of industrial and scientific applications that require continuous data processing.

 

COMPUTER

Computers of this type count discrete numbers and figures. They process discrete data information and operate on variables whose magnitudes are limited to specific limits, such as the number of people in a family. They are used in accounting, forecasting, and so on. Microcomputers, minicomputers, mainframe computers, and so on are examples.

 

COMPUTER HYBRID

This combines the benefits of both digital and analog technologies. They are used in specialized applications where both types of data must be processed in the same system. They are used in scientific and technical fields.

 

THE COMPUTER

A digital computer is an electronic device that performs high-speed mathematical or logical calculations, as well as assembles, stores, correlates processes, and prints information derived from coded data in accordance with a predetermined program. A digital computer is made up of a Central Processing Unit (CPU) to which wires and peripheral devices (input, output, and backup storage devices) are connected.

 

The CPU is made up of three major components:

 

UNIT OF CONTROL

This controls all of the machine’s operations and directs the execution of the instructions contained in the program. The unit includes a function decoder, an address, an encoder, a register, a timing pulse generator, a program instruction, a control circuit, and an instruction counter.

 

THE ARITHMETIC LOGICAL UNIT (ALU)

This unit performs the instructions’ arithmetic and logical operations. It houses the accumulator register as well as arithmetic, discrimination, and data transfer function circuits.

 

UNITS OF IMMEDIATE ACCESS STORE (S)

This contains the program that is currently being executed as well as the data on which the program is currently working. The input buffer, output buffer, working store, and program store are all used by the unit.

 

TRENDS IN PRIMARY SCHOOL – SIX PUPILS’ ACHIEVEMENT CAUSES AND SOLUTIONS

COMPUTER TYPES

Digital computers are classified into two types:

 

Special Purpose Computer (SPPC):

Certain computers are built specifically for a single task. For instance, a telecommunications system.

 

Computer for General Purposes

This digital computer is viewed as a collection of machines that are carefully linked to perform data processing functions. Microcomputers and mainframe computers, for example.

 

STUDY’S OBJECTIVE

It justifies why the study should be conducted as well as the primary goal of the research study. The investigation is underway to look into a possible solution to the problems listed below.

 

The preceding justifies why the study should be conducted, as well as the primary goal of the research study. The study has been published to:

 

(a) To investigate the issues that arose during the transition from manual accounting to an electronic data processing system.

 

(b) To investigate the problems encountered during the audit department’s computer use

 

(c) To demonstrate the importance of a computerized accounting system.

 

(d) The efficiency difference between a manual and a computerized accounting system.

 

THE IMPORTA OF THE STUDY

The study is intended not only to prepare accountants for successful completion of the National Diploma in Accounting Programme, but also to familiarize accountants with the use and operation of computers in the auditing profession.

 

The study is also significant because it investigates how accountants/auditors are dealing with the challenges posed by the use of computers. It will also investigate the importance of computers to accountants as a basis for deciding whether to switch from a manual to a computerized system. The efficiency of computer systems in comparison to manual systems, as well as the problems associated with computerized accounting/auditing systems.

 

The project will also provide readers with a useful understanding of computerized and auditing systems and will recommend areas for further research in the field of computer as it relates to auditing and accounting.

 

PROBLEM STATEMENT

Manual operations have been a historical feature of most organizations in Nigeria; however, their limitations necessitate the investigation of a more realistic approach that is workable, reliable, and efficient computerization. The study intends to look into other auditing firms, either public or private, that have gone computerized and are experiencing problems with record handling, inadequacy, and delays in receiving information in order to determine the scope of their issues.

 

Due to time constraints, the research has been limited to the computerization of the accounting system of Tantalizer Fast Food Plc, Ikotun as a case study. The field of computerization of accounting systems is vast, but this study is limited to electronic data processing systems and other areas of computerized accounting systems that will not be addressed.

 

The responses of officials from the fast food chain chosen as a case study have been uninspiring. In addition, there is a delay in receiving information from the .

 

The transition from manual to computer is a time-consuming and costly process.

 

Despite the benefits of computerization, it still has some drawbacks, such as:

 

I A lack of rudimentary knowledge and basic computer skills causes delays in business operations.

 

(ii) Another issue is the cost of procurement and training.

 

(iii) Because business acts are so diverse, adapting a computer to all of these complexities may be impossible.

 

(iv) For a newly established financial institution, computerization may be viewed as a luxury rather than a necessity.

 

LIMITATIONS AND SCOPE

Due to time constraints, this research has been limited to the computerization of the accounting system of Tantalizer Fast Food, Ikotun as a case study.

 

It should be noted that the research is limited to electronic data processing systems and financial accounting processing.

 

The responses of the establishment official chosen as a case study have not been encouraging.

 

THE COMPUTER IS IN USE

Every organization exists to provide goods and services. To achieve these goals, effective discussions are required. Decisions that anticipate problems and opportunities are enabled by information that is timely, accurate, and relevant to the specific task.

 

There is a growing awareness of the importance of data processing techniques for businessmen and accountants. This is demonstrated by the fact that an increasing number of institutions and professional bodies are including data processing as a subject in their curricula. The information system’s purpose is to meet these requirements.

 

The term information system refers to the entire scheme of data collection, organization, processing, and presentation that is most often associated with computers. The information system encompasses all aspects of information processing within an organization.

 

Data are discrete facts or phenomena that provide information about the real world.

 

Data is defined as information about a business’s activities that can be represented in the form of numbers, alphabetic characters, or symbols, such as the number of hours worked by an employee, the quantity of purchased from a store, and so on.

 

This is data that has been processed by the system. It is the pertinent knowledge generated by a data processing system for a specific purpose.

 

An information system is a collection of interconnected procedures designed to provide managers at all levels and in all functions of an organization with the information they need to make timely and effective decisions.

 

Coordination, control, and discussion of information are economic commodities that must be sold, bought, stored, exchanged, and consumed by anyone who aspires to more than mere existence.

 

PROCESSING OF

This is the term used to describe the process of gathering all terms from source data and converting them into information.

 

The following data processing operations are concerned:

 

1. Verifying.

 

2. Organizing.

 

3. Compiling data.

 

4. Keeping.

 

5. Retrieval and filling

 

Sixth, communicate.

 

ON PROCESSING

A good piece of information must be relevant, complete, accurate, timely, and well-presented in order to be easily assimilated. An information system has both formal and informal components.

 

The formal element data is processed on a regular basis. The computer is made up of two interconnected domains: hardware and software. The hardware consists of the machine and any attached peripherals. The software, on the other hand, is a set of sequential instructions that drives the hardware. Computers are broadly classified into three types: microcomputers, mainframe computers, and personal computers.

 

The mainframe computer is a large machine with many components and high processing speeds, which have a significant impact on machine cost. The maincomputer bridges the gap between the mainframe and the microcomputer. It has more capacity than a microcomputer but less capacity than a mainframe.

 

THE BENEFITS OF A MICRO COMPUTER

Today, microcomputers are widely used for the following reasons:

 

(a) Low cost

 

(b) Operational simplicity.

 

(c) There is no need for specialized training.

 

(d) There is no special room conditioning.

 

(e) Lightweight and compact.

 

When and how is computerization performed? Computerization occurs when:

 

1. A large amount of data must be processed using a predefined procedure.

 

Payroll, billing, and store cards are a few examples.

 

 

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THE IMPACT OF COMPUTER IN AUDITING

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