ACCOUNTING INFORMATION SYSTEMS

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Problem

11.8 As an internal auditor for the state auditors office, you are assigned to review the implementation of a new computer system in the state welfare agency. The agency is installing an online computer system to maintain the states database of welfare recipients. Under the old system, applicants for welfare assistance completed a form giving their name, address, and other personal data, plus details about their income, assets, dependents, and other data needed to establish eligibility. The data are checked by welfare examiners to verify their authenticity, certify the applicants eligibility for assistance, and determine the form and amount of aid.

Under the new system, welfare applicants enter data on the agencys Web site or give their data to clerks, who enter it using online terminals. Each applicant record has a pending status until a welfare examiner can verify the authenticity of the data used to determine eligibility. When the verification is completed, the examiner changes the status code to approved, and the system calculates the aid amount.

Periodically, recipient circumstances (income, assets, dependents, etc.) change, and the database is updated. Examiners enter these changes as soon as their accuracy is verified, and the system recalculates the recipients new welfare benefit. At the end of each month, payments are electronically deposited in the recipients bank accounts.

Welfare assistance amounts to several hundred million dollars annually. You are concerned about the possibilities of fraud and abuse.

a. Describe how to employ concurrent audit techniques to reduce the risks of fraud and abuse.

b. Describe how to use computer audit software to review the work welfare examiners do to verify applicant eligibility data. Assume that the state auditors office has access to other state and local government agency databases.