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Auditing: PCAOB Audit Trail, Software & General Controls for IT Systems

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Is it probable that the use of information technology (IT) will eventually eliminate the audit trail, making it impossible to trace individual transactions from their origin to the summary total in the financial statements? Explain. How do the American Institute of Certified Public Accountants (AICPA) and the Public Company Accounting Oversight Board (PCAOB) want the auditor to address controls in the light of the previous statement?

What is generalized audit software? What are the tasks for which an auditor would use it? What are the advantages and disadvantages of using generalized audit software? Will this software be more appropriate for auditing your organization's computer information system, or would it be necessary to develop customized audit software? Explain.

What is needed for an auditor to understand clients' business processes and accounting systems? What type of computer information system is used at your employer's organization? What controls are present in the system at your organization? Are the general controls that should exist in computer information systems present in the system used by your organization? What are the application controls that exist in the system?

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The solution answers all the questions regarding auditing including PCAOB audit trail, software and general controls for IT with 1426 words in total and 8 references.

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Whether the use of information technology will eventually eliminate the audit trail:

Information technology will normally convert traditional paper trail to an electronic audit trail thereby eliminating paper based journals and source documents and records. This makes an audit trail less visible and may make it impossible to trace individual transactions from their origin to the summary total on the financial statements due to the eliminations of the of the original source documents and the elimination of paper based journals and records (Coderro, 2009).

The audit trail usually represents the accumulation of various sequence source documents that validates or invalidates the entries in financial and accounting statements (Clubindia, 2011). These often serve as support for the transactions that have taken place during the accounting period. The use of information Technology can change the audit trail by converting most of the paper based source documents into electronic files that cannot be visually observed. This is especially since paper work has not been completely eliminated from the system. Since most of the transactions are entered directly into the computer system as they occur, some of the original transactional documents may be eliminated and this can cause problems during an audit trail (Clubindia, 2011).

However, IT has also made it easy to track audit trails that originate from the system. With business increasingly going online, audit trails can be used to record the activities of the customer in ecommerce. The initial contact, actions, payment and delivery of products or services are recorded entirely electronically making it audit trail easy (Coderro, 2009).

Though a mixing of paper work and electronic documents can cause a bit of a problem in audit trails, generally information technology will not eventually eliminate audit trails. It will instead enhance it making it faster and efficient. With the continuous development of accounting software, audit trails are made part and parcel of the software and as more and more transactions are going online with soft copies of documents and records issued for transactions, audit trail is set to be faster and easier and can also be used to fight cyber crime and quickly detect fraud cases in a company thereby help in eliminating fraud cases (Coderro, 2009).

How the AICPA and the PCAOB want the auditor to address controls in the light of this technological shift.

Current discussions of the Public Company Accounting Oversight Board (PCAOB) ...

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