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
Building Societies - Specialized Audit Situation Building Societies are organisations that exist to offer a savings and investment intermediate to the public and to lend to pe

Audit Function The audit functions as follows as: 1. To verify the estimation of timing differences; 2. To ensure such permanent differences have not been got into accou

Analyse the ratios in conjunction with the additional information and identify from your analysis, implications for the audit and any particular audit steps that need to be underta

Goodwill and Business Combinations - Intangible Assets Goodwill is the one of most strange of all assets since it cannot be differentiate from the business.  It cannot be sold

Permanent Audit File The permanent audit file might involve, inter alia: a) A copy of the enterprise's statutes or statutory documents and other legal governing the enterpr

Accounting Treatment Prescribed by IAS 38 IAS 38 prescribes the accounting treatment about to intangible assets, except: a) Intangible assets which are under the scope of a


i have assignment question

Factors Affecting and Controlling Occupational Health (i) Walking-Working Surface Workers must work or move on different surfaces while working. Such - surfaces are cha

Communication with Expert Whether the auditor intends to utilize the work of an expert then he must communicate along with the expert well in advance to confirm the terms of e