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CA Final · Advanced Auditing, Assurance and Professional Ethics · Digital Auditing & Assurance

CA Tanvi audits Orion Retail Ltd, which uses an automated process that generates journal entries for revenue from point-of-sale data through an interface. A system change at mid-year altered the interface mapping. Tanvi tested the automated control on a sample in October and found it effective, and general IT controls over program change were found to be ineffective for the period. Which approach best fits the situation?

Tanvi cannot assume the automated control worked consistently, because ineffective program change controls and a mid-year mapping change undermine reliance on a single test. She should test the control across the period or switch to a primarily substantive approach for revenue.

  1. AConclude the automated control is effective for the whole year, since automated controls are consistent
  2. BRely on the October test only for the post-change period and ignore the pre-change period
  3. CBecause program change controls are ineffective, she cannot assume the control operated consistently, so she should perform further testing across the period or adopt a substantive approachCorrect
  4. DTreat revenue as not susceptible to risk because the entries are system generated

Explanation

Automated controls are assumed to operate consistently only if general IT controls, especially program change, are effective. Here those controls failed and a mapping change occurred, so a single test cannot support the whole year. She should extend testing to the periods before and after the change or rely on substantive procedures. Treating system entries as risk-free is incorrect.

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