An Investigation Into The Effect Of Computer In Auditing Of An Organization

An Investigation Into The Effect Of Computer In Auditing Of An Organization

First Part

Introduction

1.1 Introduction To The Study

Accounting, according to Kola Olowookere, is the process by which administrators present their findings to the company’s owners. Auditing’s inception can be traced to the stewardship account. Frequently, the financial statement is used to conclude this reporting and accounting. Examples include the balance sheet, profit and loss statement, and cash flow statement. Auditing can be viewed from two distinct perspectives: first, as an instrument used by the management of a company to monitor the functioning of the company’s internal control system and determine whether or not it is being strictly adhered to. In other words, auditing is the independent examination of an expression of opinion on the financial statements of an enterprise by an appointed auditor in accordance with that appointment and any applicable statutory requirement. The Consultative Council of the Accountancy Bodies (CCAB), an organization that regulates the accounting profession, provides this definition. In its auditing standard published in April 1980, the Consultative Committee of Accounting Bodies (CCAB) in the United Kingdom stated, “The auditor shall gather relevant and credible audit evidence, sufficient to allow him to form reasonable judgments.” Audit evidence is information obtained and documented by the auditor as part of the process by which he reaches the conclusions upon which he bases his opinion regarding the financial statements. The identification of fraudulent activity, errors, and other irregularities is not the primary objective of an audit. The primary responsibility of the auditor is to provide a report containing his opinion regarding the veracity and accuracy of financial statements. This is done so that whoever reads or uses the statements can rely on them. However, the secondary objective is to: (a) identify errors and fraudulent activity

(b) To avoid errors and fraud

e) To ensure the reliability of the internal control system

According to Kolowookere, the following five methods may be employed to collect audit evidence:

Inspection is the examination of records, documents, or tangible assets. This may involve reading documents or examining records. The auditor may collect evidence of the presence of physical assets through inspection, but this does not always provide proof of ownership, cost, or value.

(b) Description During observation, one peers at a process or operation being performed by another individual in order to determine how that process or operation is performed. The method by which a performance was executed at the time of observation can be reliably determined through observation, but not at other times.

(c) Inquiry: This entails gathering vital information from knowledgeable individuals inside and outside the business (management, personnel, attorneys, financiers, parent company, appraisers) in a formal or informal setting, verbally or in writing. The auditor’s evaluation of the respondent’s level of expertise, experience, independence, and honesty will determine the degree of credibility he attributes to the evidence gathered in this manner.

d) Computation: independently confirming the accuracy of the accounting records or performing one’s own computations. The correctness of the underlying documents is a significant determinant of dependability.

e) The Analytical Review necessitates the investigation of any exceptional or unexpected deviations, as well as the investigation of noteworthy ratios, trends, and other statistical data. Analytical evaluation may be utilized to establish confirmation evidence for audit methods.

TYPES OF AUDITS (a) Statutory Audits: A statutory audit is conducted by an independent auditor. This independent auditor is not employed by the organization in any capacity, in accordance with applicable law and in whatever manner the auditor deems suitable. Regarding the performance of his statutory duties, the auditor may not be constrained in any manner, shape, or form.

a) Private Audit/Non-Required Audit: The private audit is an independent audit performed not because the law requires it, but because the owners desire it. Examples include audits of the financial records of sole proprietorships, partnerships, sole proprietorships, and unions.

(c) Interim Audit: An interim audit is an audit conducted up to a specified date within the accounting period, such as a quarter or half year. This type of audit is known as an interim audit. Typically, the final audit occurs at the end of the accounting period, following the completion of the intermediate audit.

(d) Internal Audit An internal audit is an investigation of any aspect of an organization’s operations conducted by a member of the organization’s personnel. This process also includes a review of the organization’s policies, plans, processes, activities, and records, which is conducted by staff members with this specific responsibility. It ensures that the company’s internal control system is operating at an acceptable level.

e) Final Audit: The Final Audit is a procedure that is completed in a single, uninterrupted session. Even if it is permissible to begin before the end of the accounting period, it must be completed at least after the end of the accounting period.

The delivery of goods and services should always be the primary objective of any business. In order to achieve these predetermined objectives, productive conversations are required. To make decisions that anticipate prospective challenges and opportunities, it is necessary to have information that is timely, accurate, and pertinent to the activity at hand. The necessity for merchants and accountants to have a firm grasp of data processing procedures is becoming increasingly apparent to the general public. This is demonstrated by the increasing number of educational institutions and professional organizations incorporating data processing into their curriculum. The purpose of the information system is to satisfy these requirements, which is why it was established in the first place.

The term “information system” refers to the comprehensive plan for data collection, organization, processing, and presentation. This scheme is frequently and closely associated with computer use. The information system comprises all of an organization’s diverse applications for information processing. Data refers to the distinct facts and occurrences from which one can derive knowledge about the actual world. The term “data” refers to any information that can be used to analyze the operations of a business. This information can be represented by numbers, letters, and symbols. The number of hours worked by an employee, the amount of materials purchased from a store, etc., are examples of data.

1.2 Description Of The Problem

The reliance on manual processes is a defining characteristic of the majority of organizations in Nigeria. However, due to the limitations of this method, there is an urgent need to investigate a more practicable computerization-based strategy. This study’s objective is to investigate other auditing firms, whether public or private, that have gone computerized and have problems with managing records, inadequacy, and information retrieval delays. This will enable the researchers to determine the scope of the issues faced by these companies. Due to the limited time available, the investigation has focused as a case study on the computerization of the accounting system at the Abuja-based Tastia restaurant. This investigation will be limited to electronic data proceeding systems and other areas of computerized accounting systems. These will be the discussion topics. Although computerization offers numerous advantages, it is not without disadvantages, including the following: I A dearth of the fundamental knowledge and skills required for utilizing computers may result in delays in business operations.

(ii) The expense of procurement and the cost of training also contribute to the problem.

Because business activities are so diverse, it might be impossible to program a computer to manage all of their complexities.

(iv) For a newly established financial institution, computerization is a luxury that is not necessarily required at this time. Consequently, it is necessary to investigate the impact of computer auditing on an organization.

1.3 Objective Of The Research

The study’s overarching objective is to examine the impact of computer auditing on an organization. Specifically, the following will guide the research:

i. To investigate the impact of computers on the audit of an organization.

ii. To determine the obstacles associated with the use of computers for auditing an organization.

iii. To evaluate the value of using a computer to audit an organization’s financial records.

1.4 Research Hypotheses

The following research subjects have been prepared:

i. What impact does the computer have on the auditing of an organization?

ii. What are the challenges of using a computer for an organization’s audit?

What are the advantages of using a computer to audit a company’s accounts?

1.5 Significance Of Study

This study is significant because it investigates how accountants and auditors respond to the challenges posed by the use of computers. In addition, the relevance of computers to accountants, the criterion for deciding whether to switch from a manual to a computerized system, will be examined. The comparative effectiveness of computer systems and manual systems, as well as the issues with computerized accounting/auditing systems.

The undertaking will also provide readers with a useful understanding of computerized auditing systems and suggest areas for future research in the field of computer auditing and accounting.

The study will be important to the academic community because it will add to the existing body of knowledge.

1.6 DIMENSIONS OF THE STUDY

This study will investigate the impact of computer auditing on an organization. The study will also investigate the obstacles associated with the use of computers for auditing an organization. The study will assess further the advantages of using a computer to audit an organization’s finances. Therefore, this investigation will be limited to the Abuja Tastia restaurant.

1.7 Limitation Of The Study

As with any human endeavor, the researchers encountered minor obstacles while conducting the study. Insufficient funds tend to impede the researcher’s efficiency in locating relevant materials, literature, or information, as well as in the data collection procedure (Internet, questionnaire, and interview), so the researcher opted for a moderate sample size. Moreover, the researcher will conduct this study alongside other academic duties. As a consequence, less time will be spent conducting research.

1.8 Definition Of Terms

A computer is an electronic device for storing and processing data, typically in binary form, in accordance with variable program instructions.

An audit is a formal examination of an organization’s financial records, typically by an independent body.