In the past, the records to be evaluated in an audit have been printed reports, listings, documents and written papers, all of which are visible output. However, in fully computerized systems which employ daily updating of transaction files, output and files are frequently in machine-readable forms such as cards, tapes or disks. Thus, they often present the auditor with an opportunity to use the computer in performing an audit.

Required:

Discuss how the computer can be used to aid the auditor in examining accounts receivable in such a fully computerized system. 

II.After determining that computer controls are valid. Hastings is reviewing the sales system of ROSCO Corporation in order to determine how a computerized audit program may be sued to assist in performing tests of Rosco's sales records.       

 

Rosco sells crude oil from central location. All orders are received by mail and indicate the preassigned customer identification number, desired quantity, proposed delivery date, method of payment and shipping terms. Since price fluctuates daily, orders do not indicate a price. Price sheets are printed daily and details are stored in a permanent disc file. The details of orders are also maintained in a permanent disc file.  

 

Each morning the shipping clerk receives a computer printout which indicates details of customers' orders to be shipped that day. After the orders have been shipped, the shipping details are inputted in the computer which simultaneously updates the sales journal, perpetual inventory records, accounts receivable and sales accounts.

 

The details of all transactions, as well as daily updates, are maintained on discs which are available for use by Hastings in the performance of the audit.

 

Required:

 

a)How may a computerized audit program be used by Hastings to perform substantive test of Rosco's sales records in their machine readable form? DO NOT DISCUSS ACCOUNTS RECEVIBALE AND INVENTORY.

b)After having performed these tests with the assistance of the computer, what other auditing procedures should Hastings perform in order to complete the examination of Rosco's sales records?