TABLE OF
CONTENT
Title page
Approval page
Dedication
Acknowledgment
Table of content
CHAPTER ONE
Introduction
1.1
Background of study
1.2
The electronic data processing
system
1.3
The significance of computer to auditing system
1.4
Internal control in a computerized system
1.5
The impact of computer system in business environment
CHAPTER TWO
Literature review
2.1
Historical perspective of computer
2.2
Classification of computer by age
2.3
Definition of computer
2.4
The role of auditor
2.5
Audit of computer / computer system
2.6
Auditing in a computerized accounting system
2.7
The peculiarities of a computerized system
2.8
Advantage of the computer and disadvantages
CHAPTER THREE
Summary of findings, c
3.1
Recommendation
3.2
Conclusion
Bibliography
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
The origin of auditing
The practice of auditing had the origin in
the necessity for the institution of some system upon person whose business it
was to record the receipt and disbursement of money on behalf of others.
When a company is established under the
companies and allied matters act 1990, as public company, the mining of such
company is normally vested in the care of management the earners of the
business i.e. the shareholders are usually not involved in the day to day
activities of the company, there is thus the need for ran independent person or
group of persons to examine the record on behalf of the owners the person (s)
whose duty it was to report on such record to the owners is the “auditor”. The
word “audit” was derived from the Latin word “audile” meaning to hear.
In medieval Britain, auditor were appointed
by feudal Barons to ensure that the revenue produced by their serfs and tenant
revenues farmers were accurately accounted for and that their serfs were not
cheating or hiding revenue due for the landlord. The landlord rarely became
involved in the management of their estates and would simply rely upon the
properly verified or substantiated accounts of their employees.
However, in the remote times, auditors works
were portrayed in ancient Egyptians wall painting and their activities were
recorded in the writing of the early Roman empire. During this period, audit
was confined to ascertaining whether the acting party had properly accounted
for the receipt and all the payment on behalf of his principal. This made the
acting party just merely a cash auditor. The modern audit however, include not
only cash transaction but also the verification of the finance position disclosed
by the balance sheet and the profit and loss account of the undertaking
Definition and scope of auditing
Definition there are various definition given
to auditing by different bodies but having the same meaning.
The international auditing practice committee
(IAPC) has defined an audit as “an independent examination of and the
expression of an opinion on the financial statement of an enterprise by an
appointed auditor in accordance with the terms of his engagement and in
compliance with relevant statutory obligation and professional requirement.
The auditing standard and guideline of the
consultative committee of the accountancy body (CCAB) has defined an audit as
an independent examination of an expression of opinion on the financial
statement of an enterprise by an appointed auditor in pursuance of that
appointment and in compliance with any relevance statutory obligation”.
Okolo JUT (1987) expressed that “an audit
could be conscientious objective examination of and inquiring in any statement
of account relating to money in money worth, the underlying document and the
physical assets where possible will enable the auditor to form an opinion as to
whether or not the statement of account present a true and fair view of
whatever it purport to represent and to report accordingly”.
Scope of an audit
By scope of an audit, we mean the area which
the audit work covers. It bothers on critical examination and verification of
the accuracy of a financial statement by
an independent auditor and this scope depend on a number of actors such
as:
vThe type of audit work to be carried out
vThe size of the organization
vThe nature of the business concerned
vThe skill and experience of the staff
involved
vThe qualification of the staff involved and
vThe objective of such audit
Nature and purpose of auditing
vNature of an audit:
The day to day running activities of the
company is vested on the directors. Their responsibility is to ensure that the
possibility of fraud and error is reduced if not eliminated; they set up a
system of internal control for various check and procedure in order to control
the recording of the business transaction. Upon engagement of the auditor for
any audit assignment, the work is performed at the event premises.
The audit work is a two stage operation for
each year in which case, the first stage is a system audit whereby the audit is
conducted to a particular date within the accounting period this first stage is
also known as interim audit
Stage two is that the audit is carried
through to completion in one continuo’s session which involves verification of
items in the final accounts.
Audit are performed by audit team comprising
of audit trainees and qualified accountant. A manager will oversee their work
while the actual audit is signed by one of the partners in the name of the
audit firm.
Purpose of an audit
The main and statutory object of an audit is
to give a report on the view presented by the account and statement prepared by
the client and his staff in accordance with the term of the audit appointment.
The above object is the primary purpose of an audit, in which case the auditor
is to conduct such test and enquires as he considers necessary to form his
opinion.
However, other secondary purpose includes:
vTo detect errors and fraud
vTo prevent errors
vFraud by the deterrent and moral effect of
the audit
vTo provide spin – off effect,
vAssisting client with a accounting system
taxation service
vFinancial and other consultancy work
1.2
THE ELECTRONIC DATA PROCESSING SYSTEM
The advent of electronic data processing
(EDP) or computer has had a great influence on the auditing processes
Auditors have always been concerned with
problem associated with making time and fair report and form their trailing and
experiences, they are able to handle these difficulties. Before the advancement
of the data processing technology or computer, the processes of auditing,
accounting and other business data were carried out manually.
Development in computer technology are
changing the art and science of auditing which complement book keeping and
accounting practice of modern business world.
Computer is now taking over the traditional
purpose of accountant. Like calculation and data processing within business
enterprises.
In order to be able to function effectively
the new generation of auditor need to acquaint them with a working knowledge of
computer operation and technique of data processing in a computer based
accounting environment.
Auditor of today needs not be a computer export, but he must be computer
literature in order to monitor the work
flow. As a result of the forgoing fact, the student of ICAN professional
examination II are expected to write or be tested on management information
service (MIS) to acquaint themselves with computer term and appreciation.
As the use of computer is irrelevant to the
accounting and auditing concept, the only compelling reason for the use of
computer in accounting courses is that accountant need to deal with computer
based accounting information system and their subsequent auditing