Essential guidance for the financial auditor in need of a working knowledge of IT If you're a financial auditor needing working knowledge of IT and application controls, Automated Auditing Financial Applications for Small and Mid-Sized Businesses provides you with the guidance you need. Conceptual overviews of key IT auditing issues are included, as well as concrete hands-on tips and techniques. Inside, you'll find background and guidance with appropriate reference to material published by ISACA, AICPA, organized to show the increasing complexity of systems, starting with general principles and progressing through greater levels of functionality. Provides straightforward IT guidance to financial auditors seeking to develop quality and efficacy of software controls Offers small- and middle-market business auditors relevant IT coverage Covers relevant applications, including MS Excel, Quickbooks, and report writers Written for financial auditors practicing in the small to midsized business space The largest market segment in the United States in quantity and scope is the small and middle market business, which continues to be the source of economic growth and expansion. Uniquely focused on the IT needs of auditors serving the small to medium sized business, Automated Auditing Financial Applications for Small and Mid-Sized Businesses delivers the kind of IT coverage you need for your organization.
Preface xi Acknowledgments xiii Chapter 1: Why Is IT Auditing Important to the Financial Auditorand the Financial Statement Audit? 1 Management's Assertions and the IT Audit 2 Objectives of Data Processing for Small and Medium ]Sized Enterprises (SMEs) 5 Special Challenges Facing SMEs 8 Research Confirming the Risks Associated with SMEs 13 A Framework for Evaluating Risks and Controls, Compensatory Controls, and Reporting Deficiencies 16 Summary: The Road Ahead 20 Chapter 2: General Controls for the SME 21 General Controls: Scope and Outcomes 22 The "COSO Process"--Putting It All Together: Financial Statements, Assertions, Risks, Control Objectives, and Controls 30 Summary 35 Chapter 3: Application ]Level Security 37 Key Considerations 37 Initial Security Setup 40 Security Role Design 42 Password Configuration 44 Segregation of Duties 48 Personnel, Roles, and Tasks 49 Access Reviews 56 Human Error 58 Summary 58 Chapter 4: General Ledger and the IT Audit 59 The General Ledger: A Clearinghouse of Financial Information 60 Chart of Accounts for QuickBooks 62 SME Risks Specific to the General Ledger and the Chart of Accounts 65 Assertions Underlying the Financial Statements and General Ledger Controls 66 IT Controls, the Transaction Level, and the General Ledger 66 Summary 78 Chapter 5: The Revenue Cycle 81 Risk Exposures and Subprocesses 81 Application Controls, Revenue Cycle Risks, and Related Audit Procedures 84 Summary 105 Chapter 6: The Expenditure Cycle 107 Risk Exposures and Subprocesses 107 Application Controls, Expenditure Cycle Risks, and Related Audit Procedures 111 Summary 133 Chapter 7: The Inventory Cycle 135 Risk Exposures and Subprocesses 136 Application Controls, Inventory Cycle Risks, and Related Audit Procedures 143 Summary 157 Chapter 8: The Payroll Cycle 159 Risk Exposures and Subprocesses 159 Application Controls, Payroll Cycle Risks, and Related Audit Procedures 163 Summary 248 Chapter 9: Risk, Controls, Financial Reporting, and an Overlay of COSO on COBIT 249 PCAOB Warnings: Insufficient Evidence to Support Opinions 250 How We Got Here: A Historical Perspective 251 Risk 260 Risk and Fraud 261 Controls 262 Financial Reporting 269 PCAOB Guidance on IT Controls 279 Integrating COSO, COBIT, and the PCAOB 280 Summary 286 Chapter 10: Integrating the IT Audit into the Financial Audit 289 Risks, Maturity, and Assessments 290 Cross ]Referencing COBIT to the PCAOB and COSO 295 Plan and Organize 303 Program Development and Change 311 Computer Operations and Access to Programs and Data 317 Monitor and Evaluate 330 Summary 334 Chapter 11: Spreadsheet and Desktop Tool Risk Exposures 337 Specific Types of Risks and Exposures 338 Research on Errors in Spreadsheets 339 Compliance Dimensions of Spreadsheet Risk Exposures 344 Spreadsheet Auditing Tools 348 Governance of Spreadsheets and Desktop Tools 352 Control Considerations 355 Auditing Controls and Creating a Baseline 356 Life after the Baseline: Maintaining Spreadsheets and Desktop Tools 368 Summary 369 Chapter 12: Key Reports and Report Writers Risk Exposures 371 How Reports Are Used 371 Original Reports within the Application 372 Modified or Customized Reports within the Application 376 Reports Using Third ]Party Packages 378 Analyzing and Validating Reports 382 Summary 383 Chapter 13: IT Audit Deficiencies: Defining and Evaluating IT Audit Deficiencies 385 A Framework for Audit Deficiencies 385 Types of IT Audit Failures and Illustrative Cases 388 Use of Compensatory Controls 388 Ideas for Addressing Segregation ]of ]Duties Issues 388 Summary 398 References 399 About the Authors 405 Index 407
