Systems based audit approach, Auditing

Systems Based audit approach

The basis of IAS 400, Risk Assessment and Internal Control.

The term systems audit refers to the typical audit approach to medium and large companies and is based on the assumption that such companies have internal control systems which will hopefully constitute a reliable base for the preparation of the accounts. In other words, the characteristic of a systems audit is an examination of internal control.

We have already established that many small companies cannot achieve satisfactory internal control and it is hence clearly futile for the auditor to seek to rely on controls if they don't exist or are patently unreliable. For such enterprises the auditor has no alternative but to carry out a so called 'substantive audit' involving extensive verification of transactions followed by a detailed examination of the balance sheet (verification of assets and liabilities and review of the financial statements).

The contemporary audit approach to reasonably sophisticated companies is therefore to carry out a system-based audit during the course of the accounting year, followed by a balance sheet audit at the year end - if the systems audit work is successful, i.e. the controls prove reliable, the auditor can use his judgement to reduce the extent of the balance sheet work (in no circumstances will the balance sheet work be eliminated entirely!).

Posted Date: 12/3/2012 6:27:16 AM | Location : United States







Related Discussions:- Systems based audit approach, Assignment Help, Ask Question on Systems based audit approach, Get Answer, Expert's Help, Systems based audit approach Discussions

Write discussion on Systems based audit approach
Your posts are moderated
Related Questions

OBJECTIVES To apply certain steps in the audit planning process, with emphasis on risk identification and audit response (strategy) thereto. To provide you with the exp

Q. What is Transferred Basis? Transferred Basis - A transferred basis is the foundation of property in the hands of a transferor, donor or GRANTOR. In this sense a prior owner'

People do not plan to fail, they fail to plan. Planning is an essential feature of an effective audit. The most effective plan is one that is reduced to writing, outlining the au

Experts as a source of Audit Evidence Mostly the auditor's work on evidence obtained from along within the entity supported through confirmations from third parties will provi

Beneficial Ownership - Audit Process We have to examine documents of title as e.g. title motor vehicles, deeds and log books.  Whether there are no implied ownership can suffi

Existence - Plant and Machinery However this should generally be checked through physical inspection, so a problem arises.  Items of machinery and plant can be numerous mobile

Financial Institutions and Banks - Audit Situations Financial Institutions Because of the recent collapse of many financial institutions, this is still a heavily regu

Kelley Brent, CA, is a partner in a one-office CA firm that audits Dane, Inc., a closely held corporation. Kelley''''s sister was recently appointed as the chief financial officer

e following situations involve a possible violation of the MIA ByLaws (on professional ethics, conduct and practice). For each situation, (1) decide whether or not the Code has bee