I would like to answer it in detail as follows:-
Computer Audit Approaches
Computer audit approaches or techniques are that methods used by auditors to examine and verify financial records and transactions that are stored and processed electronically. These techniques have become increasingly important as businesses have transitioned to computerized accounting systems.
Traditional Approach
In the traditional approach, auditors manually review financial records and transactions without using the computer system itself. This method relies on paper-based documentation and physical verification.
Embedded Audit Modules (EAMs)
Embedded audit modules (EAMs) involve embedding audit routines directly into the software of the computer system. These routines automatically analyze transactions as they occur, providing real-time auditing capabilities.
Parallel Testing
In parallel testing, auditors create a separate, parallel system for the central computer system, where transactions are processed independently. The results from both systems are then compared to identify any discrepancies.
Test Data Approach
Auditors introduce test data into the computer system to observe how it handles transactions. This helps in assessing the system's accuracy and reliability.
Audit Software
Specialized audit software is used to analyze data within the computer system. This software can identify irregularities, anomalies, and potential risks in large datasets.
Continuous Auditing
Auditors continuously monitor and analyze transactions in real-time using automated tools and techniques. This approach allows for immediate detection of errors or fraudulent activities.
Characteristics of Electronic Data Processing (EDP) Systems
EDP systems offer several advantages over traditional manual accounting methods:
-
Speed: EDP systems can process large volumes of data quickly, enabling faster decision-making and transaction processing.
-
Accuracy: EDP systems reduce human error through automated data entry and processing, leading to more accurate and reliable results.
-
Reliability: EDP systems are designed to operate consistently and dependably over time, ensuring continuous data availability and service.
-
Efficiency: By automating repetitive tasks, EDP systems improve operational efficiency and productivity within organizations.
-
Integration: EDP systems can be integrated with other software and hardware components, facilitating seamless data exchange and communication across departments and systems.
-
Security: EDP systems incorporate various security measures, such as encryption, access controls, and data backups, to protect sensitive information from unauthorized access or damage.
-
Scalability: EDP systems can adapt to changing business needs and accommodate increasing data volumes without significant disruptions or limitations.
-
Auditability: EDP systems maintain detailed audit trails, documenting all transactions and system activities for accountability and regulatory compliance purposes.