SAS-109 Analysis

SAS-109 Analysis

Auditing is used to evaluate and verify the credibility of the financial statements and accounting transactions within an entity. Therefore, auditors need information and processes used within an organization to come up with the statements they provide. Therefore, any procedure that can increase, decrease or have any influence on the financial statement should be understood by the auditor. Therefore, information systems, being a growing area in the accounting processes and tools, dictates that any information that comes from information technology should be understood for auditing to be effective. Use of information systems or technology in any organization has an effect on the internal control of the entity. For instance, if a business uses information system whose sales transaction and entry are not adequately understood by users, errors could occur while making changes for use in other processes. Therefore, auditors need full understanding aspects of how the transactions and entries in the accounting system are made, and the role played by the information system.

Some of the aspects of information systems or IT that auditors need to understand in order to conduct fair audit include the processes such as data entry, whether it is automated or manual, the records it holds for purposes of recording, authorizing, reporting transactions, processes, and events and conditions used for the maintenance and accountability of accounting transactions. Quality of the information system has a massive influence on the management in decision-making. Therefore, the auditor needs to understand the information system fully, as well as the business procedures relevant in financial reporting. This helps the auditor in understanding more about the entity. One of the factors that are understood is the transaction categories of the entity that are significant in financial statements. This further helps in understanding the procedures used such as records and authorization that is reported in an audit report. It helps in understanding the reporting processes used for the preparation of the financial statements and estimates among others. Additionally, considering that problems within accounting processes occur, the auditor needs to understand the correction measures used to resolve this in order to assert that the information was corrected.

Auditors need information from an entity in order to conduct an audit. Therefore, with information systems that are used within entities for accounting operations, auditors should use the information they find relevant and credible for their audit. As previously highlighted, audits use the information system or IT for understanding the operations that are relevant to financial reporting that will be included in an audit report. Auditors are supposed to use the information systems to understand operations such as monitoring. Information systems are used by management as a monitoring tool, and auditors can find it quite important for assessing control of the financial reporting. This should help the auditor in finding out how such monitoring is used for corrective measures when there are problems within financial reporting. Since the information systems are trusted for monitoring of internal control, they play a crucial role in assessment of risk. Therefore, auditors make good use of information systems in assessing the risks associated with the entity. Additionally, auditors are supposed to identify any misstatements or errors that could amount to fraud. Through information systems and IT, auditors can have an easy assessment to identify such errors considering information systems will record and show changes that take place all the time. In general, auditors use information systems within an entity for understanding all the relevant operations that are required for making their reports on the credibility of financial statements.

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