Finer Furnishings Limited is a Vancouver-based company that makes an extensive range of furniture for sale throughout North America. While it produces a wide range of standard lines of furniture, many of its products are also custom designed in light of extensive discussions conducted with its retailer customers. These custom designs are then produced in batches to satisfy the retailer's anticipated demand.

The costing system used to assign costs to batches of furniture and to individual pieces of furniture manufactured by Finer Furnishings is relatively complex. Moreover, it is highly computerized. Production personnel enter various inputs into the system to calculate costs-for example, their labor time, the machines used and the durations of their use, the materials requisitioned, scrap and wastage quantities, scheduling delays, and small tools use. The system also takes into account an extensive range of overhead costs in determining a final product cost. To add to the complexity, the costing system is tightly integrated with other systems used by Finer Furnishings-for example, a sales forecasting system, an order entry system, a bill-of-materials system, a material requirements planning system, and an inventory system. Moreover, these 'systems rely extensively on electronic data interchange for exchange of critical data between Finer Furnishings and its customers and suppliers.

The market in which Finer Furnishing operates is intensely competitive. As a result, its products have little profit margin. The accuracy of the costings performed within the costing system, therefore, is critical to the survival of the company. The system is also a high-exposure system because it has to be maintained frequently. It is a legacy system; it is old, extensively modified, poorly structured, and not well documented.

Because of the high exposures associated with the system and the lack of a visible audit trail, the internal audit staff have implemented snapshot/extended records as a concurrent auditing technique within the system. They spend considerable time using the snapshots and extended records to check the accuracy of costings within the system. On several occasions in the past, costing errors have severely undermined the company's financial position. In this light, senior management has charged internal audit with the responsibility for timely detection of costing errors or irregularities.

You are the senior information systems auditor for an external audit firm that has just taken over the audit of Finer Furnishings. During discussions that your partner has had with the manager of internal audit, he has been told that Finer Furnishings expects the extent of substantive testing associated with the costing system will be minimal because reliance can be placed on the work performed by the internal audit group via the snapshots and extended records.

Required: Your partner asks you to advise him on the merits of the arguments made by the manager of internal audit with Finer Furnishings. Write a brief report outlining your recommendations. If you believe further information needs to be obtained from Finer Furnishings in relation to the internal audit staff's use of the snapshot/extended record technique, indicate what information you believe should be sought.