Handout #5 (Case 4)

Requirement a.

How may Ana use a computerized audit program to perform substantive tests of Rose’ sales records in
their machine readable form? Do not discuss accounts receivable and inventory.

Answer:

Although it was stated that the computer audit program was valid, the auditor should first review and
asses the accuracy of the said computer program before making her opinion. Since Rose's business
consists prices that fluctuate on a daily basis, the program that she would be using must probably be
subjected to suffice being adjusted on a regular schedule. We had assumed, that under this
circumstance, that Ana would preferably use a Purpose-written program so that it could suffice on audit
tasks that require the ability to perform the task on hand under specific circumstances.

In this case wherein prices differ per day, we find it advisable that Ana uses a parallel simulation of the
program that is used by Rose, and conduct a test by reprocessing transactions from the clerk's computer
printout containing the details of customer orders. The basis of the prices should also be similar to the
price sheets printed daily, and should be accurately matched with the sales accommodated by Rose
Corporation. Based on the information in the permanent file and the printed document, Ana should
then compare the results obtained from the simulations with Rose Corporation's output to be able to
draw a conclusion on the reliability of the client's program.

Requirement b.

After Ana performed these tests with the assistance of the computer, what other auditing procedures
should Ana perform to complete the examination of Rose’ sales record?

Answer:

Assuming that Rose Corporation relies on computer programs in recording its transactions and activities,
there only a limited number of solutions that Ana can do to audit further due to the lack of transaction
trails when auditing a Computer Integrated System. If Ana is still not satisfied with her findings after
conducting a simulation, Ana may also audit around the computer and manually compare the
information recorded and focus more on the CIS output. This is possible because according to the
problem, the shipping clerk daily receives a printout of the customer orders, and Rose Corporation also
has printouts of the changes of prices on a daily basis - therefore might probably have enough
documents that will support her research.

But if Ana is already satisfied with her findings in the parallel simulation, she may also conduct an inquiry
from personnel within the company, and from experts outside the company. This way, she would have
more knowledge in the field of business that Rose Corporation is in, giving her enough knowledge to set
a judgement. This will also give her the capability to formulate a more credible expectation on the
possible outcome of every transactions to determine the reasonableness of the output that Rose
Corporation has. It would be better for Ana to Inquire from the central location because a confirmation
from Rose Corporation's source would give more credible details regarding the basis of the fluctuating
rates of prices.
 Auditing
Theory
Handout No. 5
Case 4

Submitted by: Alvariño, Vanessa. .

Estrel, Yna Christiana.

Lagrada, Ellyn Joy. .

Perez, Vina Dorothy. .

Submitted to: Mr. Mario P. Tadiwan, Jr.