Mr Dickens is a partner in Quill, Penn and Co., a firm of accountants. The firm has recently been appointed as auditors of IT Ltd, a company which maintains its accounting records on a mainframe computer. This is Mr Dickens’ first experience of auditing in a computer environment. None of his staff have a great deal of knowledge in this area either, although the manager in charge of the audit did take a one-year class entitled ‘Introduction to Computers’ whilst at university and also attended a training course in computer audit shortly after qualifying as an accountant.

Rather than appear old-fashioned, Mr Dickens has spent £4,000 on an audit software package. He then despatched his manager to IT Ltd with the tape, manual, and an instruction to ‘go and check out their system!’. Shortly afterwards, he received a telephone call from IT’s systems director. The following points were made:

(a) The company maintains its files on a database. The audit package purchased by Dickens is intended for use in a more traditional system where records are filed sequentially. The CAAT cannot be run unless the company spends a great deal of time converting its records to a different format.

(b) There was no need to waste money on a new piece of software. The query program in the company’s database software can do everything that the audit manager wishes. One of the company’s programmers can write the necessary instructions.

(c) The computer system is operating at almost full capacity. The company simply cannot spare a great deal of computer time for the auditor.

Answer the following questions:

(a) Discuss the wisdom of Quill, Penn and Co.’s decision to accept nomination for this audit. Should they have done so?

(b) How should the approach to the company’s computer system have been planned?

(c) What problems could be created if the company converts its files before the CAAT is run?

(d) Should the company’s programmer be permitted to produce the reports required by the auditor?

(e) If the use of a CAAT is an indispensable component of the audit, what action should the auditor take if access to the company’s system is denied?