Microsoft Word Audit Quality-Framework Final vs 20140214
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| Information Systems 95. Sound information systems are necessary to support high-quality financial reporting. Some jurisdictions have specific legal requirements and standards relating to the entity’s accounting and other systems and internal controls over them. Many, however, do not. There may also be specific laws or regulations related to the auditor’s consideration of information systems but, even if not; the nature and quality of an entity’s information systems will affect the nature, timing and extent of audit evidence obtained. 96. The business undertaken by smaller entities is sometimes less complex, with few sources of income and activities. In such cases, accounting systems are usually simple and utilize relatively less complicated technology, and sometimes formal internal controls may be limited. 30 97. While the basic accounting systems of many entities may be well controlled and reliable, financial reporting requirements increasingly require additional information, especially for the notes to the financial statements. Information on matters such as the fair values of assets and non-financial key performance indicators will often need to be obtained as a discrete activity or from systems that are not normally a part of the accounting system. Such information may not be as well controlled as information from the accounting systems, and this can affect overall financial reporting quality. 98. Information systems are usually computerized. While computer systems will usually process information accurately, they can be subject to systemic weaknesses, security and continuity problems. Effective corporate governance arrangements will often require internal auditors to provide assurance to those charged with governance or management as appropriate, about the reliability of the entity’s information systems. 99. The importance of information systems extends beyond financial reporting and, increasingly, businesses are becoming dependent on complex systems and the technology that underlie them. For example: Many manufacturers depend on automated processes to manage ‘just in time’ production processes. Many retailers depend on automated stock and distribution systems. Some retailers do business solely on-line. Most financial institutions and telecommunications companies and many important public sector entities rely on automated systems for undertaking and processing high volumes of transactions with speed and accuracy, often on a global basis. 100. Failure of automated systems within IT dependent entities can result in significant costs to the business and, in extreme cases, to business failure. 5.5 Download 1.81 Mb. Share with your friends:
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