An Assignment on

“The impact of information technology on the audit process.”

Course Tittle: Auditing
Course Code: ACT 427
Section: 01

Submitted to
Rehnuma Hoque Moutushi
Senior Lecturer
Department of Business Administration
East West University

Submitted by
Ash Shafi
ID: 2018-3-10-006

Submission Date
28 August, 2023
Abstract
This assignment examines how technology has revolutionized and influenced the business
operations of public, private, and non-profit businesses, as well as the criteria that must be followed
to guarantee compliance with applicable laws and regulations. The openness of financial accounts
is critical to shareholders and other key stakeholders. These requirements that financial statements
be audited in order to gain a certain level of confidence in the integrity of numbers and the validity
of business rationale create a need for auditors to be well equipped with all the tools and system
essentials in carrying out an effective and efficient audit. Information technology may either be a
barrier or a stimulant to achieving the aforementioned goal. Various firms make use of automation
technologies and ERP solutions, which have become essential components of their internal control
environment. Understanding of these automated controls by auditors is essential to guarantee that
they have the appropriate skills and understanding of any technical adjustments that would be
required in the audit process of a complex structured business. The fundamental role of generalized
audit software is to customize data in a variety of ways to fit a specific goal. The audit teams learn
about the newest advancements and organize their operations in accordance with the appropriate
professional standards.
Table of Contents
Introduction ..................................................................................................................................... 1
Audit Planning ................................................................................................................................ 1
Empirical Analysis .......................................................................................................................... 2
Cross Training of Audit Team ......................................................................................................... 2
Impact of IT on the Role of Auditor ............................................................................................... 3
Threats and Opportunities for Audit Functions .............................................................................. 4
Automated Evaluation Techniques and Leading CAATS ............................................................... 4
Embedded Audit Module ................................................................................................................ 4
Automated Evaluation Techniques ................................................................................................. 4
Application of CAATs in Banks ..................................................................................................... 5
Conclusion ...................................................................................................................................... 5
References ....................................................................................................................................... 6
Introduction
The audit evidence, as a critical component of the auditing process, provides assurance to the
auditor while carrying out the essential procedures on the entity's financial statements and
underlying books of accounts. Throughout the audit, materiality determines the type and extent of
audit evidence that the auditor must receive to establish reasonable certainty. Technological
innovations and future-oriented IT approaches have significantly altered the shape and type of
audit evidence. Technology has fundamentally altered the accounting cycle and internal controls
over financial reporting, as well as the auditing processes and methods used by auditors to obtain
audit evidence in order to obtain reasonable assurance and achieve the overall goal in accordance
with International Standards on Auditing. It was more difficult to assure the fairness of the financial
statements and the sort of audit report to be utilized when the auditor's main tool was a calculator
and paper information reproducing proof. The materiality factor is supported by the argument that
no matter how strong the entity's internal controls over financial reporting are or how extensive
the audit work performed, some misstatements will go undetected even if the audit is planned and
performed effectively and efficiently. The auditor's responsibilities have grown dramatically in
light of the vulnerabilities and ongoing danger of earnings management, which might possibly
damage the amount of openness that financial statements portray. Risk assessment is essential to
the auditing process. However, it will not be able to fully manage its risks, which is essential to
the entity's long-term performance in achieving its overall objectives and vision. Using bespoke
CAATs in the auditing process may assist limit the major deviations in the financial statements.
Pre-technology audits are distinguished by the fact that all the data was collected using paper
documents, calculators, and no information communication technology. The likelihood of an error
or mistake was higher in the past since, no matter how intently auditors concentrated, one
erroneous entry into the calculator may result in a figure that was produced that was inaccurate
and prone to error. Future audits would have to be conducted without the use of paper and would
necessitate the acquisition of pertinent information using online technologies. The necessity for
automated audit trails and the usage of electronic data exchange will soon replace manual audit
trails as the auditors' primary source of evidence. The goal of the article is to assess how the use
of new Information and Communication Technology (ICT) methodologies and approaches has
changed or modified how audits are conducted and how they work. This not only pushes the
regulatory bodies that oversee quality assurance to keep vigilant to changes and assure their
compliance to strengthen the integrity and fairness of the auditing process, but it also forces the
function of the auditor to develop. In order to use technology in the best way possible to accomplish
the goals while adhering to the established International Standards on Auditing, public accountants
must use certain techniques and strategies, which are depicted in the paper's conclusion.

Audit Planning
In the later stages of an audit, when numerous procedures are carried out, using IT can make it
simpler to reap the advantages of good planning and facilitate the efficient completion of the
complete process. Public accounting companies have repeatedly shown how crucial expert systems
are to the creation of an audit strategy in the past. The fact that all of the Big 4 firms use planning-
related expert systems during the risk assessment stage, evaluation of the control environment, and

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development of the plan emphasizes the importance of incorporating automated tools into planning
and allocating the resources accordingly to mitigate the significant risks associated with audits and
decrease the amount of work necessary to be done as less reliance is placed on the substantive
procedures and extensive control testing is carried out. The importance of the auditor's judgment
and experience gained through participation in various engagements cannot be understated,
regardless of how well the expert systems are developed and equipped with a pool of knowledge
amassed over time. Additionally, the fact that the expert systems can sometimes be challenging to
customize to the nature of the client and the business process involved therein further emphasizes
the importance of the pool of expertise involved in the aud. The auditor's experience is derived
through conducting audits of diversely constituted organizations and from comprehending the
intricate workings of the client's enterprise resource planning system. The public accounting firms
must develop a method for collecting their collective expertise and create a database that can be
used to resolve any potential issues during upcoming audits. Such a database may be integrated
with an expert system to aid the auditor and provide a cloud of information that may very well turn
out to be an invaluable tool for the public accounting firm when organizing audits.

Empirical Analysis
The study was limited to a specific element of the variations in how tasks were carried out before
and after the introduction of specialist audit software, as well as the impact on productivity and
the corresponding adjustments to audit processes. The study's findings were fairly foreseen,
emphasizing how the development of specialized audit software has reduced the need for repetitive
calculations, freed up professional staff to concentrate more on the analytical aspects of their work,
improved the effectiveness of ensuring compliance with applicable legal and regulatory
requirements, facilitated the provision of high-quality client services, and contributed to saving
time. The ease with which work documents may be retrieved with the use of various instruments
was a recurring theme throughout the. It has become simpler to document high-quality electronic
evidence thanks to this feature, and it has also made life easier for the staff members who have
been tasked with conducting reviews to make sure that the audit procedures actually address the
risks involved. Another crucial concept was the removal of the need for a calculator, which might
be a hard, tiresome, and time-consuming task, through the use of clear formulae. However, all the
evidence emphasized on the fact that embracing the specialized audit software and unlearning the
old knowledge took significant amount of time to become familiar with it and to use it purposefully
to achieve the assigned objectives.

Cross Training of Audit Team

Numerous top-tier companies have developed to identify the areas where employees fall short and
that need to be addressed in the employee training program to make them well-aware of the IT
aspects of the environment of customers in light of the widespread technological revolution.
Experts in auditing may also participate in the program to share their knowledge of information
systems and to provide scenarios and solutions for issues that may develop while using client
systems. By allowing staff members in many locations to attend the course online over the internet,
e-learning (also known as electronic learning or online learning) principles have also enabled the
wide diffusion of information. Because the workforce now has a number of responsibilities at their

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disposal that add depth to their skill set and broaden their areas of expertise, cross training might
be advantageous. This not only enables businesses to employ people with a variety of abilities, but
it also facilitates staff members' career growth, which might inspire them to work productively and
successfully.

Impact of IT on the Role of Auditor

Thanks to advanced accounting software and contemporary integrated financial systems, the
function of the auditor has significantly altered. In order to conduct a successful and efficient audit,
it is now necessary to have a thorough grasp of the various software that the company employs.
The audit team's diverse skill set aids in producing high-quality deliverables, achieving one of the
main goals of accounting and auditing businesses, namely, giving clients superior services. The
requirement for professional skepticism has grown in the technology age we live in, and the audit
evidence has to be carefully scrutinized with more vigilance while keeping in mind relevant
expertise of the area subject to processes. While it could make the entire audit process easier
overall, the auditor may find it counterintuitive given the intricacy of the record-generation process
and the electronic environment in which it was done and the audit's subject matter. For instance,
knowing how to utilize the software would be crucial and the first step in analyzing the type and
content of the information if any firm used SAP to manage its operations, conduct business, and
store its databases. Additionally, the software's flaws or faults would prevent smooth operation,
and their fix would take more time and call for a software professional. According to the same
reasoning, the audit engagement team's makeup may also call for the addition of an ITS specialist
as support personnel. This individual would have a firm grasp on the operation of the system and
be able to handle any issues that could occur throughout the audits. IT experts are typically
employed by audit companies to conduct IT audits and join the audit team as needed. In many
respects, technology has changed what an auditor does. Due to the use of communications
technology, there is no face-to-face interaction between the audit team employees and the client.
The benefit of quick communication is one thing, but the danger of the source's and the content's
validity has emerged as an issue since it is sometimes hard to identify the source from which the
intended message has been received. International organizations in charge of making sure that laws
and standards in the field of information technology keep up with developments, such as the use
of integrated financial systems and ERP applications, have released a number of guidelines to
emphasize the significance of this and give the proper direction regarding appropriate e-evidence
formats. No matter how well developed and programmed, these programs may contain flaws that
logical access violators could exploit, posing serious risks to the confidentiality of clients'
information and the systems. These applications software enable automation, eliminate
voluminous manual work, and facilitate processing accuracy. The auditor's role in this situation is
crucial, and walkthroughs can be carried out to ensure that the operating effectiveness of the
application systems installed before extensive control testing is done. They can also be used to
determine the type, timing, and scope of procedures that should be taken into account as part of an
audit program.

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Threats and Opportunities for Audit Functions
The audit role is under constant assault as the idea of real-time accounting and the emphasis on
the value of information expand. The job of the auditor may be reduced to some extent by the
constant monitoring of the information systems and the installation of programs to make real-time
modifications immediately. The role of an auditor may be limited or altered by automated controls
that need little to no manual involvement, are fully compliant with the standards, and are running
efficiently. Real-time assurance services also provide public accounting companies the chance to
create artificial intelligence (AI)-based solutions, which are seen as the workplace of the future.
Technology and technique changes are inevitable, and as a result, business processes are changing
as well. Both clients and audit professionals must prioritize keeping up with the pace of technology.
This may be seen as a chance to pick up new skills and develop a resource pool of people who are
able to adapt to different client situations and handle them successfully.

Automated Evaluation Techniques and Leading CAATS

Over time, various application program types have been created, such as those that simulate
internal control systems, generate queries to identify internal control flaws, allow for the
description of internal control systems and their status, and represent the sometimes-complex
interrelationships between internal controls so that system vulnerabilities can be evaluated. The
degree of control that may be exercised by a party is crucial whenever software is employed as a
source for gathering evidence. The danger associated with the data that the auditor would get for
their examination increases with the level of control that one party has over the software. There
are several software programs that are accessible that are sector- and business-specific. There is
further commercial software available that gives auditors the ability to modify data in accordance
with predetermined criteria and gather evidence via the apps. The auditors have streamlined the
procedure and increased audit productivity by using automated assessment methodologies. A few
of the most popular CAATs are briefly mentioned.

Embedded Audit Module

A popular CAAT that is added to the client's ERP or system enables the auditor to keep track of
the transaction's real-time processing and make modifications as needed to guarantee that it meets
the user requirements established during the requirement definition stage. These codes are in use
when the system needs to handle a significant quantity of processing. Because it is real-time, it
helps to increase the value of the information. The choice of audit samples is made simpler. An
integrated audit module often speeds up the audit cycle and raises the standard of the audit. To
guarantee that the code is running as intended and has not been updated, it must be securely stored.

Automated Evaluation Techniques

• Integrated Test Facilities: To guarantee that the processed output bears the properties such as
correctness, completeness, and consistency, a fake set of data is integrated into the application or
program.

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• Snapshot: This requires monitoring real-time audit trails of transaction processing. This method,
which resembles data flow diagrams in some ways, provides a visual representation of the direction
of flow.

Application of CAATs in Banks

Since these tools are well versed in the rules and regulations pertaining to the industry, they have
helped to elevate the quality of services that can be provided. They have also helped to design the
format of work papers to eliminate any incorrect calculations that may occur during the audit.
Markup earned on loans and advances provided, interest paid on customer deposits held by the
bank, investments, which are one of the bank's main profit-generating activities, examination of
substantial value transactions in cash credit accounts, accounts with no activity and that have
become dormant over time, are some specific areas that can be performed during the audit using
the CAATs in a bank, the traditional idea of keeping the treasury function as a cost center has been
replaced by the dynamic investment environment and profit-making opportunities that exist in the
market today, and speculative treasury operations are increasingly recognized as vital. The
requirement for real-time information is more critical for banks that focus on equity investments,
and technology may be able to help them by supplying timely information that can be used in
trading operations. As diverse complicated transactions that take place in the branches may be
readily covered by automated criteria to guarantee that the approved limits are not exceeded and
the person authorized to approve the transaction really sanctioned it, the function of CAATs in this
respect becomes very crucial. The information systems installed by the Client's IS department are
capable of reporting any exception when there is any deviation from the procedures laid out in the
manual, and CAATs can also ensure that the standard operating procedures in carrying out a
banking transaction in a specific course of business are being followed. To provide transparency
and guarantee that the economic events supporting the financial statements present a truthful and
fair image, CAATs can enable the testing of such procedures.

Conclusion
The notion of real-time auditing by integrating modules into the ERP systems of businesses subject
to audit has developed over time with the world's top auditing firms leading the way. Traditional
audits have been supplanted with specialized CAATs. Information and communication
technologies have significantly changed how public accounting companies conduct financial
statement examinations and verify adherence to pertinent rules, regulations, and legislation. A
paradigm changes in the function of the auditor and practicing accounting companies has occurred
as more and more customers move toward automation and employ contemporary ICT to carry out
their daily operations. In order to compete successfully and advance in the market, auditors must
refresh their IT skills, be well-equipped, and be knowledgeable of the newest techniques. The urge
to utilize the available technology and the desire to maintain income and reputation need that
auditors continuously modify their working procedures in order to gather and preserve information
that would allow them to support an opinion on the financial statements. In order to design a
successful audit, the auditor must have a thorough grasp of the client, its methodologies, business
processes, and other pertinent information, according to International Standard on Auditing ISA
315. Before beginning a thorough audit, it is crucial to comprehend the technology placed in the

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control environment to ensure accurate financial reporting. This also calls for the audit team
members to get ongoing professional training and development so that they may gain the necessary
skills and knowledge to meet regulatory requirements and provide excellent client services.

References
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Organizational Commitment,”. Hum. Resource. Manag. Rev.
J. Pathak, M. Lind, and M. Abdol Mohammadi. (2010). “E-Commerce Audit Judgment Expertise:
Does Expertise in System Change Management and Information Technology Auditing
Mediate ECommerce Audit Judgment Expertise?”. Inform. Econ.
M. K. Moorthy, A. S. (2011.). “The impact of information technology on internal auditing,”.
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