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Seattle Paper Products (SPP) is modifying its sales department payroll sysiem to change the way it calculates sales commissions. Under the old system, commissions were a fixed percentage of dollar sales. The new system is considerably more complex,

with commission rates yarying according to the product sold and the total dollar volume of sales.
Jason Scott was assigned to use audit software to write a parallel simulation test program to calculate sales commissions and compare them with those generated by the

new system. Jason obtained the necessary payroll system documentation and the details on the new sales commission policy and prepared his program.
Jason used the sales
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These audits result in recommendations to improvf processes and controls used to ensure with regulations.
5. A\ investigative audfi examines incidents of fraud, misappropriation of assets, waste and abuse, or improper govemmental

In contrast, extemal auditorc are responsible to corporate shareholde$ and are mostly concerned with gathering the evidence needed to express an opinion on the financial statements.
They are only indirectly concemed with the effectiveness of a corporate AIS. Howeyel, extemal auditors are required to evaluate how audit stategy is affected by an organization,s use of information technology (IT). Extemal auditors may need specialized skills to (l) determine,how the audit will be affected by Il (2) assess and evaluate IT conftols, and (3) design and perform both tests of IT controls and substantive tests.
Despite the distinction between intemal and extemal auditing, many of the internal audit concepts and techniques discussed in this chapter also apply to external audits.
The first section of this chapter provides an overview of auditing and the steps in the auditing process. The second section descdbes a methodology and set of techniques for evaluating intemal contols in an AIS and conducting an information system audit. The third section discusses the comput software and other techniques for evaluating the reliability and integrity of information in an AIS. Finally, operational audits of an AIS are reviewed.


The Nature of Auditing

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