Discuss the impacts of information technology in auditing financial statements
Information technology in auditing is considered to be vital to the auditing of the financial statements. This is because the information technology is perceived to be the ultimate foundation or the platform of today’s system of accounting. This paper evaluates the role of information technology and how it affects the process of auditing and the role of modern information technology in financial and management accounting and reflects on the impact of computerized accounting systems in large and small businesses (Ali 2012). Information technology audit are essential for making sure that a financial statements of a company are the accurate representation of the true position. On the same note, to ensure that method used to gather the financial statements is properly operating and it produces accurate results and results that are free from any misrepresentations. Information technology auditing permits the company auditors to offer more efficient financial audit since it presents the auditor with the procedure and diverse data that the client or the customers used to prepare the financial statements. Information technology auditors usually have three aims. These are to provide:
Both the financial auditors and the information technology auditors can make a decision on what process best guarantee reliability of the company’s financial statements (Bloom 2014). There are usually five management assertions that are usually well thought-out during all the forms of audits. These are:
The Impact of Information Technology on Auditing
Increases the efficiency of an audit
Information technology audits usually go past providing that the financial statements of a company’s passes all the five management assertions, alternatively they investigate under the top layer of diverse data or information that is provided by the company and searched within the software so as to determine whether the company and the system uses to document all of their financials battles against unintentional and intentional misstatements (Moorthy 2011). For instance, when a particular auditor is confirming some existence they will usually check at the sales journal so as to as to see the items sold and also confirm the actually that the items was sold. An Information technology auditor will definitely broke into the system and then reads out the codes that confirms that when a particular piece of stock is purchased, the system records it in it stocks journal and also in the sales journal. The Information technology auditor is responsible for making sure that all the required and necessary control exists because when proving the aspect of completeness, an information technology auditor has the responsibility for substantiating that the audit controls is properly in place and they are properly working. Bearing in mind the example that is stated above, to prove the aspect of wholeness, instead of basically verifying that the control exists for making the essential adjustments in the sales and inventory journal, the Information technology auditor would need to confirm that suitable changes are in reality made (Porter 2014)
Provides an improved transparency governance of a company
Rights and obligation confirms to the company’s lawful status of its asset and the liabilities. An information technology auditor would utilize this particular affirmation so as to establish that the data used in this system is justifiable and that they are diverse controls in place so as to sustain the integrity of the inputted information (Margetts 2012). A financial auditor usually considers the assertion of valuation, an accuracy that exists between a company’s estimate that are used as the cornerstone of the valuation of their liabilities and assets. An information technology auditor would evaluate the assertion of valuation by investigating diverse aspects such as the pricing table’s links, the accuracy and design of the spreadsheets models, lockup tables and the aspect of integrity of the company data basis (Stoel 2012). Financial auditors usually authenticate that the accounting procedures are usually in place by investigating who does the task such as posting and preparation of the end period adjustments entries, and that the particular task was concluded. An Information technology auditor would usually focus on evaluating whether such particular undertaking was executed by the individual that was in reality allocated the task. Information technology that relates to the assertions above as well as other diverse IT controls needs to be evaluated recurrently so as to provide assurance that the particular company is confined against any misrepresentations or any provision of untrue statements and the weaknesses that is within their scheme (Taipaleenmäki 2013). Eventually, diverse companies have developed to be more and more information technology incorporated as this means that the organizations face new challenges as the software applications demand increases and additional software products are positioned on the marketplace earlier than the companies did all their financial statements tasks by hand.
Information technology in auditing has helped in the maximization of profits
Emphasis of the information technology in a company is considered to be an important factor because it helps in the maximization of profits and other benefits from both the staff and the business partners such as identifying some strength and also some weaknesses of the company attached parties (Dowling 2014). This allows the organization pinpoint some of the areas of improvement that exists within the company because the most vital benefit of company involvement in information technology is the fact that it assists the gain access to several remote information from the computers and enables the company prevents frauds and errors made during the process of auditing. Some loss that could have been experienced due to manual auditing will be minimized since use of IT techniques will provide accurate results and this aspect will reduce the chances of a company being misrepresented by its auditors and disadvantages within their system. Eventually, diverse companies have developed to be more and more information technology incorporated as this means that the organizations face new challenges as the software applications demand increases and additional software products are positioned on the marketplace earlier than the companies did all their financial statements tasks by hand (Li 2012).
Reduces the aspect of fraud and abuse
Mismanagement and the aspect of untested presumption on a company can be very much precious due to poor auditing practices. Proper handling of resources, maintenance of records, and efficient communication through adoption technology is usually critical to ensure completeness of the audit process and benefited auditors. Reduction of frauds and errors is considered to be another impact of information technology on the aspect of auditing because the wide use of information technology in the practice of auditing is vital since it will assist the company in reduction of errors and frauds that may be initiated by the internal auditors. The use of computers skills in the issue of auditing have been considered paramount since it assist the investor in understanding the real value of the company that they wish to invest into since the computer skills applied to auditing will be able to prevent and detect any fraud and misrepresentation of the company books of accounts and financial statements (Moorthy 2011). Computer assisted audit techniques is usually used to reduce the aspects of frauds and errors since the techniques is used to improve effectiveness because Computer Assisted Audit Techniques involves using the information technology to perform functions that would take much longer or even functions that are impossible to perform manually. Auditors aided by Computer Assisted Audit Techniques have increased effectiveness of auditing in financial and management accounting and also reflected on the impact of computerized accounting systems in large and small businesses (Margetts 2012). IT development on the other hand for example automation and computerization had increased risk that involved discontinuing the company’s activities, network breakdown, data loss and influence company’s monitoring and he control process. In this context, the main aim of the auditor is usually to monitor, improve and evaluate risk management, controls and the governance process.
Information technology enhances the performance of employees in the company
For the managers to appraise the performance of employees, the company that uses diverse software programs such as the Small Improvements or Human Resource Management Direct with the assistance of IT, because the organizations are able to provide better results on it production. Auditors will review the company’s human resource documents so as to determine the accuracy of the employees records because an auditor has the responsibility of verifying the existence of employees from the company records (Reynolds 2011). For an auditor to verify the actual existence of employees in the company using the aspect of information technology, he or she will have to log into the company database for employees and examine their day to day work schedule and the time this particular employee’s usually reports to work. An information technology auditor would usually focuses on establishing whether such particular job was done by the individual that was essentially allocated the job. Information technology that relates to the assertions above as well as other diverse IT controls needs to be regularly assessed so as to warrant that the particular business is well shielded against any misrepresentations or any provision of untrue statements and the weaknesses that is within their system. Some of the organizations provide a customized products or services to their customers, and all this are only possible because of involvement in information technology (Li 2012). Auditors aided by Computer Assisted Audit Techniques will increase the effectiveness of auditing in financial and management accounting because ghost employees will be able to be detected from the company database and this aspect will provide the company with a greater platform of increasing its profits by saving costs paid to non-performing or nonexistent workers.
Reduce routine tasks so as to provide more time for the aspect of creativity and business analysis.
In this particular moment, the members of audit committee ought to take more dynamic responsibility in supervision this area because diverse companies usually rely greatly on the aspect of IT and comprise an increase in organizational risks. External auditors who are widely employed by diverse companies in the world will used some of the sophisticated information techniques to carry out their audit procedures and work (Stoel 2012). In doing this particular aspects, the company auditors will be able to tap more resources that are fully employed by the external auditors so as to enhance their auditing skills because financial auditors usually authenticate that the procedures of accounting are in place by investigating who carry out the work such as posting and preparation of the end period adjustments entries, and that the particular job was completed. Information technology auditing permits the auditors to offer more efficient financial audit since it offers the auditor with diverse information that the customers used to set up his or her financial statements. Coming up with accurate information about the company’s financial position is always vital for an auditor and this is why employment of information technology in auditing is important (Bloom 2014). Information technology if used in the aspect of auditing will results to accurate statements that show the actual position of a company because of its accuracy.
In conclusion, companies should then review the current technology so as to decide if the technology can be of help and add some value without increasing the costs used because when an organization regularly make changes to their process technology as this is much important as they will possibly reduce the costs and also improve the product and services value. Information technology use by the company’s auditors is proved to be important because of diverse impacts that helps improve the process of auditing and the modern information technology in financial and management accounting and also reflects on the impact of computerized accounting systems in large and small businesses (Ali 2012). Information technology audit are crucial because it ensures that the company’s statements of finance shows a true image of the company’s true position and that the techniques employed to gather the financial statements is properly operating and it produces perfect results and that they are free from any misrepresentations. Information technology auditing permits the auditors to come up with extra efficient financial audit since it offers them with enough data that the customer used to come up with his or her financial statements. Information technologies have incredibly changed auditing practices because it has made several things that are applicable in day to day life much easier, several advances in technology has made the transition more possible because communication has been enhanced too. An auditor can be able to protect the company’s reputation using Computer Assisted Audit Techniques that provides accurate accounting statements that will be used by all users who have interest in the company.
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