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

An auditor of a company using an ERP system finds that the entity's accounting records are maintained entirely in electronic form. Which statement about the impact on the audit is most appropriate?

The auditor may need to test general IT controls and application controls before relying on system-generated information. Electronic records do not remove the need for audit evidence, substantive procedures or consideration of unauthorised access risk.

  1. AAudit evidence is no longer required because the system generates reports automatically
  2. BThe auditor may need to test general IT controls and application controls to rely on system-generated informationCorrect
  3. CSubstantive procedures must be dropped in favour of controls testing alone
  4. DThe auditor need not consider the risk of unauthorised access to data

Explanation

Where records are electronic, the auditor assesses IT general controls and application controls to decide reliance on system output. Evidence is still necessary, substantive procedures are not eliminated, and unauthorised access is a key risk.

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