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The Balcar Company’s external auditors are developing an audit plan to review the company’s systems development procedures. Their audit objectives are to ensure that 1. the system was judged necessary and justified at various checkpoints throughout the SDLC. 2. systems development activities are applied consistently and in accordance with management’s policies to all systems development projects. 3. the system as originally implemented was free from material errors and fraud. 4. system documentation is sufficiently accurate and complete to facilitate audit and maintenance activities. The following six controllable activities have been identified as sources of audit evidence for meeting these objectives: systems authorization, user specification, technical design, internal audit participation, program testing, and user testing and acceptance. Required a. Explain the importance of each of the six activities in promoting effective control. b. Outline the tests of controls that the auditor would perform in meeting audit objectives.

BuyFind

Accounting Information Systems

10th Edition
Hall + 1 other
Publisher: Cengage Learning,
ISBN: 9781337619202
BuyFind

Accounting Information Systems

10th Edition
Hall + 1 other
Publisher: Cengage Learning,
ISBN: 9781337619202

Solutions

Chapter
Section
Chapter 16, Problem 10P
Textbook Problem

The Balcar Company’s external auditors are developing an audit plan to review the company’s systems development procedures. Their audit objectives are to ensure that

  1. 1. the system was judged necessary and justified at various checkpoints throughout the SDLC.
  2. 2. systems development activities are applied consistently and in accordance with management’s policies to all systems development projects.
  3. 3. the system as originally implemented was free from material errors and fraud.
  4. 4. system documentation is sufficiently accurate and complete to facilitate audit and maintenance activities.

The following six controllable activities have been identified as sources of audit evidence for meeting these objectives: systems authorization, user specification, technical design, internal audit participation, program testing, and user testing and acceptance.

Required

  1. a. Explain the importance of each of the six activities in promoting effective control.
  2. b. Outline the tests of controls that the auditor would perform in meeting audit objectives.

Expert Solution

a.

To determine

Discuss the importance of six activities that help in promoting effective control.

Explanation of Solution

Internal Control:

Internal controls are the controls established in an organization to check the errors and frauds. Establishment and maintenance of internal controls is responsibility of the management.

The six activities that help in promoting effective control are important in following manner:

  • • System authorization: This activity determines that only authorized person has the access to systems and applications used in the organization. Authorization control helps to control theft of data or application abuse by unauthorized users.
  • • User specification: Understanding user specification is an important activity before actual system is developed. Under this activity, a user specifies its requirements to the developer. Using the guidelines and requirements developer develops the system as per the user specifications.
  • • Technical design: It includes giving technical shape to user’s requirements. This activity involves checking practical feasibility, requirement assessment, and designing of the system...
Expert Solution

b.

To determine

Identify the test of controls to be performed by auditor in achieving audit objectives.

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Chapter 16 Solutions

Accounting Information Systems
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