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CMA Intermediate · Corporate Accounting and Auditing · Application of Technology in Audit and Audit Trail

Aarav & Co., auditors of Kaveri Retail Ltd., plan to rely on an automated three-way match control in the ERP. Which sequence of actions is most appropriate to support reliance on this automated application control?

The auditor should test the automated control and also test the general IT controls over program changes and access. If those general controls are effective, the automated control is expected to operate consistently, so reliance is justified. Assuming it works forever or relying on management assertions is inadequate.

  1. ATest the control once, and rely on it for all future years irrespective of changes
  2. BTest the effective operation of relevant general IT controls, especially program change and access controls, and test the automated control, since consistent processing is expected if these are effectiveCorrect
  3. CRely solely on the management representation that the ERP is vendor-certified
  4. DTest a large sample of invoices manually and ignore the ERP control entirely

Explanation

Automated controls usually operate consistently unless the program is changed. Hence testing the control combined with effective general IT controls over change management and access gives a basis for reliance. Relying forever without checking for changes ignores the risk of unauthorised modification, and representations alone are not sufficient evidence.

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