USBB, an Australian property and casualty insurer, actively seeks to maintain a paperless office. Toward that end, it has invested in optical character recognition scanning technology so that incoming paperwork (e.g., an insurance application) can be immediately scanned into an electronic file. From there, its image or the data on it can be sent to whomever needs it via the company's vast computer network that connects offices throughout its nationwide operations. A copy is also stored in USBB's centralized database.

a. Discuss the implications USBB's system (i.e., optical character recognition scanning technology) may have on your audit of the company.

b. How will this level of sophistication in use of information technology affect your assessment of the organization's ability to mitigate its risks and reduce the risk of misstatements in the financial statements? In other words, what types of errors or fraud will be more prevalent in this setting as opposed to the more traditional paper-based one?