Previously Kudler Fine Foods had asked accounting firm 123 Accounting for their recommendation on a system which would improve automation in their business processes. Accounting firm 123 Accounting provided Kudler with a recommended course of action to take towards automating their accounting information system, as well as provided a flowchart to assist in describing the process by which the software will help management consolidate their financial data. Currently Kudler is asking accounting firm 123 Accounting for a proposal for audit schedules for the systems previously mentioned.
This report will briefly outline an audit proposal, from 123 Accounting , on the previously analyzed systems to include; payroll, accounts payable, accounts receivable, and the inventory process. This report will 1) distinguish between a few different types of audits available for Kudler. 2) Recommend an audit appropriate for each of the mentioned processes. 3) Give an explanation on how the audits would be conducted. 4) Lastly, 123 Accounting will identify events that might prevent reliance on auditing through the computer. Different Types of Audits Available
There are various types of audits available when it comes to examining accounting information systems. All audits should be able to evaluate obtained evidence which can determine if – for this instance, information systems – process are operating effectively and there is a strong comfort in the integrity of the data. Typically information systems audits are performed in conjunction with financial statement audits or internal audits, however, an examination may be performed whenever management/clients deem necessary.
Technology and Strategy authors Richard Goodman and Michael Lawless suggest three approaches in carrying out IT audits. 1) Technological innovation process audit: An audit that evaluates and assesses the company’s experience in the chosen system and creates a risk profile upon findings. 2) Innovation comparison audit: This type of audit analyzes the innovation of the company in comparison to their competitors. 3) Technological position audit: This audit is a review of the company’s current system and gives a recommendation to what needs to be added to reach optimal performance.
While Goodman and Lawless propose three approaches in carrying out IT audits; text book authors Hunton, Bryant, and Bagranoff of Core Concepts of Information Technology Auditing state that there are four main types of IT audits, which are: 1) attestation; 2) findings and recommendations; 3) SAS 70 audit; and 4) a SAS 94 audit. Attestation
In this type of engagement the auditor provides assurance on something for which the client is responsible for. For example, Kudler’s management would provide the 123 Accounting with a letter of representation on their internal controls. 123 Accounting will then review/examine the company’s internal controls and verify that they are in place as stated. Findings and recommendations
This type of report would not offer an opinion; rather, it would be a summary of work performed in connection with the audit engagement. In short, this audit would be considered as a consulting or advisory type of audit. SAS 70 Audit
In this type of audit an opinion is given similar to a financial audit. SAS 94 Audit
This type of audit is similar to the SAS 70 audit; however, SAS 94 is more guided towards IT systems. For example, authors Hunton, Bryant, and Bagranoff state in their text that a SAS 94 audit requires the auditor to: “Consider how a client’s IT processes affect internal control, understand how transaction are recorded, and understand how journal entries are processed through the company’s accounting information systems” (Hunton, 2004). Recommended Audit
As stated previously in the Automated Process Memo, it was 123 Accounting's recommendation that the highest priority was to ensure that Kudler’s software for each...