An Assessment of Effective Use of Computers to Auditing. Case Study of Price Waterhouse Coopers

TABLE OF CONTENTS

Declaration ..................................... .... . ........................... .

Approval ..................... ... ............................................... .

Acknowledgement ...... ... . .. .... . ........................................... .

Table of contents .............................................................. .

List of tables .... . .. ... .... _ .. _ ............ _ ..... ... .... ...... . ..... ............ .

Abstract ...................... ...... .... ......................................... .

Abbreviations .................................................................. .

CHAPTER ONE

1.0.0 Introduction ..................................... ......... ................ .

1.2.0 Background ...................... ........................................ .

1.3.0 Introduction to the problem .. ......................................... .

1.4.0 Statement of the problem ....... ..... .. ................ ............... .

1.5.0 Objectives of the study ......................... ... .... ................ .

1.5.1 General objective ........ ...... ......................................... .

1.5.2 Specific objective .. ............................................... .... . .

1.6.0 Research Questions .. . ...... .. .. .......... .... .......................... .

1. 7.0 Significance of the study .. .. .......... .. ............. ... ............... .

1.8.0 Delimitation of the study ............................................... .

1.9.0 Limitations of the study . .................... .... ....................... .

1.1 0.0 Conceptual framework ... .. .. ........ ... .. ............ ..... ......... .. .

1.11.0 Scope ofthe study ............................................ ....... ... .

CHAPTER TWO

L TERA TURE REVIEW.

2. J . 0 Introduction ..... ...... . ............ ................................... .

2.1.1 Definition of Auditing .... .. ............... ................. ......... .

2.1.2 Auditing in Computer System ........................... ........... .

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2.2.0 User Controls .. .. .............. .. .. ...... .. . .... . .. ......... ....... .... .

2.3.0 EDP Application Controls .... ..... .. .. ..... ... .... .... ..... .... . .... .

2.3 .1 Controls over Input .... ................ .. .. . ..... .. ...... ..... ..... . .. .

2.3.2 Controls over Processing and Computer Data Files .............. .

2.3 .3 Controls over Output ...... ................ ...... ..... ....... ..... .... .

2.4.0 General EDP Installation Controls ......... .................. ...... .

2.4.1 Organisation and Management Controls .... ... .................... .

2.4.2 Application Systems Development and Maintenance Controls ..

2.4.3 Computer Operation Controls ......... ...... ... ............ ... . ..... .

2.4.4 System Software Controls .. ...................... ..... ..... ......... .

2.4.5 Data Entry and Programme Controls ............ .. .......... ....... .

2.4.6 Access Controls .................................... .. .. ... .. ..... ..... .

2.4. 7 Other EDP Installation Controls .......... ... ............... .. ... ... .

2.5.0 Computer Controls Activities Chart .......................... ..... . .

2.6.0 Potential EDP Audit Problems that are easily avoided ............ .

2.7.0 Computer Assisted Audit Techniques (CAATs) ....... .. .... ..... .

2. 7.1 Audit Software .......... .. ........................... ... . ... .. ......... .

2.7.2 Test Data .. . .. ..... ..... ...... ..... ............. .. ... ....... ............ .

2.7.3 Uses ofCAA Ts in Audit Process ... . .. . .. .................. ......... .

2.8.0 Auditor's Operational Standards with Computers ..... ........... .

2.8.1 Planning ....................... .................. ....... ... . ...... ........ .

2.8.2 Controlling ........................................ ..................... .

2.8.3 Recording .. .............................. .. . .............. ............. .

2.8.4 Accounting System .... ..... .... ............ ........................... .

2.8.5 Audit Evidence ................... .. ................. .................. .

2.8.6 Internal Controls ... .................... ................... ... .. ...... . .

2.8.7 Review of Financial Statements .. . ... .............. ..... .. ........ . .

2.9.0 Audit in Computer Environment at PwC ........... .. ......... .... .

2.9.1 Diagrammatic Presentation ofPwC Audit Process .............. .

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CHAPTER THREE

THE RESEARCH METHODOLOGY

3 .1.0 The Research Design and name of the research design .......... .

3.2.0 Data Collection Techniques .... .. ... ... ........................ ..... .

3.2.1 Observation ........................... ......... ...... ..... .. .. ... ..... .

3.2.2 Documentary Study ..... ..... .. ............................... ... .. ... .

3.2.3 Interview .......................... ..... ................. ... ........... .

3.2.4 Questionnaire ....... .................. .................... ........ .. . .

3.3.0 Sampling Techniques ............................................... .

3.3 .1 Sampling Framework .......... ... ..... ........ .. .... ... .... ... . .. .. .

3.3.2 Sample Size ..................................... .. . ..... .. . ........... .

3.3.3 Sampling Technique ... . ........... .................. .... ..... .... ... .

3.4.0 Data Analysis Strategy ............. .................... .. . .. ....... ..

3.5.0 Conclusion .. .. ............. ................... ........ ................ .

CHAPTER FOUR

RESEARCH FINDING AND DATA ANALYSIS

4.1.0 Introduction .................... ... .......................... .......... .

4.2.0 Data Analysis Technique ... .................. .... ... ........... ..... .

4.3.0 Discussion and Interpretation of Findings ............ ............ .

4.4.0 Opportunities Obtained from Computerised Audit System ..... .

4.5.0 Problems Facing Auditors in Computerised Audit system .. . .. .

CHAPTER FIVE

CONCLUSION AND RECOMMENDATIONS

5.1.0 Introduction ........... ..... .. .... .... ............... .. ........... . ..... .

5.2.0 Conclusion ... . ..... ............... .. ................ ................ .. .

5.3.0 Recommendations to the Auditors and Management .. .. .... . .. .

ABSTRACT The study on "the effective use of computers in auditing" is very important due to the facts that, in today's global business conduct and the economic performance in general largely depend on critical analysis and reliable information from various sources of information. These sources of information are of different types, ranging from the engineers, economist, fmancial analysts, auditors, accountants etc. In this context auditing as one and most important source of information concerning the reliability of financial statement and non fmancial matters in an organization, like management performance and operation of the activities. The information are of extremely important to a number of persons ranging from, Shareholders, Investors, Management, Government and others as a bases for their rational decision. Previously auditing was carried out through manual system but today due to complexity of businesses, which is associated with time constraints the use of computers in auditing has proved inevitably. Due to that fact, the researcher decided to carry out a research on the effective use of computers in auditing in order to establish its reliability on its execution of the process. The researcher was also interested to know the advantages and problems or challenges that the auditors might face when they keep in use of computers in auditing. Basically, this is the observable fact, which this dissertation endeavors to address within the context of PwC, which is my case study. In undertaking the study, the researcher decided to use various techniques (as described in chapter three of the dissertation) of collecting, analyzing and interpreting data collected, from which 80% out of 100% of the selected sample was used as a decision criteria to validate the problem as to whether computers are effectively assisting PwC auditors in auditing.