2019/07/26

Introduction -
The impact of
computers on
internal controls
1

Computers are often integrated into

the controls of a company

As auditors most companies operate with some form of computer system and therefore we must
be able to:

1. Identify risks in a CIS environment,

2. Recommend controls in a CIS environment,
3. Test controls in a CIS environment AND (Lesson 3) System and data CAAT’s
4. Perform substantive audit work in a CIS environment (Lesson 3)

You have already covered the principles of what a control system tries to achieve in the topic –
Gathering audit evidence (1), with a focus on manual control systems.

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Remember the following about

internal controls:
1. They are implemented by management;

2. They are designed to achieve objectives/ address risk – these can be operational, financial or

legislative

3. Auditors are concerned about controls that address overall audit risk and account balance/

transaction level risk (Validity, accuracy, completeness)

4. If control systems are good OR the nature of the business is highly automated – then the auditor

will include tests of controls in their audit plan.

So what additional risks exist in a

computerised environment?
• Harder to identify fraud + error because of high volume of transactions
o Entity relying on systems that not processing all valid transactions (completeness)
• Unauthorised access which results in….changes, errors, fraud.
• Unauthorised changes to master file data
• Unauthorised changes to system / programs
• Failure to make necessary changes (inadequate controls in place to identify them and react)
• Inappropriate manual intervention
o Results from lack of general controls (authorisation, SOD, Reviews, training etc.)
• Potential loss of data and revenue.
o Computer systems crash and down time, data is not tangible, can be lost if not BACKED UP.

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So what additional controls exist in a

computerised environment?

Computer controls in place to ensure transactions are valid, accurate, complete

Programmed / Automated Controls Manual / User Controls

General Controls Application Controls General Controls Application controls

In the next video, we look at some more detail around what types of controls can be implemented

Thank You