An Investigation Into the Effect of Computer in Auditing of an Organization

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

According to Kola Olowookere, accounting is the process through which managers present their findings to the owners of the company. The creation of auditing may be traced back to the stewardship account. The financial statement is often used so that this reporting and accounting may be completed. There is the balance sheet, the profit and loss account, and the cash flow statement as some examples. Auditing may be seen from two distinct points of view: first, auditing can be understood as a tool that is used by the management of a firm to monitor the functioning of the company’s internal control system and determine whether or not it is being rigorously adhered to. In other words, auditing is defined as the independent examination of an expression of opinion on the financial statements of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation. This definition comes from The Consultative Council of the Accountancy Bodies (CCAB), which is an organization that oversees the accounting profession. In its auditing standard published in April 1980, the Consultative Committee of Accounting Bodies (CCAB) in the United Kingdom said, among other things: “The auditor shall gather relevant and credible audit evidence, sufficient to allow him to form reasonable judgments.” Audit evidence is information that is gathered and documented by the auditor as part of the process of arriving at the findings on which he based his view about the financial statements. The detection of fraudulent activity, mistakes, and other anomalies is not the main purpose of an audit. The main responsibility of the auditor is to provide a report detailing his opinion about the truth and fairness of financial statements. This is done to ensure that anybody who reads or uses the statements may depend on them. Nevertheless, the secondary goal is to: (a) identify mistakes and fraudulent activity

(b)     To avoid mistakes and fraud

c) To act as a check on an individual’s morality; d) To provide an honest and balanced perspective of his viewpoint; and e) To guarantee the dependability of the internal control system

According to Kola Olowookere, the following are the five procedures that may be used to gather audit evidence:

(a) Inspection is when records, papers, or physical assets are examined. This may entail studying documents or looking at records. The auditor may gather proof of the presence of physical assets by inspection, but this does not always offer evidence of ownership, cost, or worth of the assets.

(b) Observation In the process of observation, one looks at a process or operation that is being carried out by another individual in order to discover how that process or operation is carried out. The method in which a performance was carried out during the moment of observation may be reliably ascertained via observation, but this cannot be done at any other time.

(c) Inquiry: This comprises gathering important information from competent individuals both within and outside the business (management, personnel, solicitors, bankers, parent company, valuers) in a formal or informal setting, verbally or in writing. The auditor’s judgment of the respondent’s level of expertise, experience, independence, and integrity will determine the degree of trustworthiness that he assigns to the evidence that was gathered in this way.

(d) Computation: Either verifying the correctness of the accounting records or carrying out one’s own computations independently. The correctness of the underlying records is something of a determining factor in the dependability.

(e) The Analytical Review requires the investigation of any deviations that are exceptional or unexpected, as well as the research of notable ratios, trends, and other statistical information. The confirmation evidence for the audit methods may be established by analytical evaluation.

TYPES OF AUDITS (a) Statutory Audits: An audit that is considered to be statutory is one that is conducted by an independent auditor. This independent auditor is someone who is not employed by the organization in any capacity, in line with the enabling law, and in whatever way the auditor judged appropriate. When it comes to performing his statutory obligations, the auditor is not allowed to be constrained in any way, shape, or form.

(a) Private Audit/Non-Statutory Audit: The private audit is an independent audit, and it is carried out not because the law mandates it but because the owners want it. Audits of the financial records of sole proprietorships, partnerships, sole businesses, and unions are some examples.

(c) Interim Audit: An interim audit is an audit that is performed up to a specified date within the accounting period, such as a quarter or a half year, for example. This kind of audit is called an interim review. The final audit often takes place at the conclusion of the accounting period, after the intermediate audit has been completed.

(d) Internal Audit An internal audit is an investigation of any facet of a company’s operations that is carried out by a member of the company’s staff. A review of the organization’s policies, plans, processes, activities, and records is also a part of this process, and it is carried out by staff members who have been given this specific responsibility. It makes certain that the internal control system of the company is functioning at an acceptable level.

(e) Final Audit: The Final Audit is a procedure that is carried out in one continuous session until it is finished. Even if it is possible for it to be started before the end of the accounting period, it is guaranteed to be finished at least after the end of the accounting period.

The provision of products and services should always be the primary focus of any firm. In order to accomplish these predetermined goals, it is necessary to have productive conversations. Information that is timely, accurate, and relevant to the particular activity at hand is required in order to make choices that foresee potential challenges and possibilities. The need for businessmen and accountants to have a solid understanding of the processes involved in data processing is becoming more and more obvious to the public. This is shown by the fact that a greater number of educational establishments and professional organizations are including data processing as a topic into their educational programs. These needs are meant to be met by the information system, which is why it was created in the first place.

The phrase “information system” refers to the comprehensive scheme of data gathering, organization, processing, and display. This scheme is most often and closely related with the use of a computer. The information system encompasses all of the many applications that an organization has for the processing of information. The distinct facts and happenings from which one might glean knowledge about the actual world are what are referred to as data. The term “data” refers to any information that can be used to assist in the analysis of a company’s operations. This information can be represented in the form of numbers, alphabetic characters, or symbols. Some examples of data include the number of hours worked by an employee, the quantity of materials purchased from a store, etc.

 STATEMENT OF THE PROBLEM

One of the defining characteristics of the majority of organizations in Nigeria is their reliance on manual processes. However, because of the limits of this method, there is a pressing need to investigate a more practical strategy that makes use of computerization. The purpose of this research is to investigate into other auditing firms, either public or private establishments, that have gone computerized and have problems of handling records, inadequacy, and delay in getting information. This will allow the researchers to determine the scope of the problems that these firms are facing. As a result of the limited amount of time available, the investigation has been focused on the computerization of the accounting system at the Tastia restaurant located in Abuja as a case study. The field of computerization of accounting systems covers a very broad area; however, the scope of this study will only focus on electronic data proceeding systems and other areas of computerized accounting systems. These will be the topics of discussion. In spite of the fact that computerization offers many benefits, it is not without drawbacks, such as the following: I A lack of the fundamental knowledge and skills necessary for using computers might cause delays in corporate operations.

(ii) The cost of procurement as well as the cost of training are another source of the issue.

(iii) Because there is such a wide variety of business activities, it may be impossible to program a computer to handle all of their intricacies.

(iv) For a financial organization that has just started operations, computerization is a luxury that may not be considered essential at this point. Hence the need to look into the effect of computer in auditing of an organization.

    OBJECTIVE OF THE STUDY

The general objective of the study is to investigate the effect of computer in auditing of an organization. Specifically, the study will be guided under the following:

i.          To examine the influence of  computer in the audit of an organization.

ii.        To find out the challenges in the use computer for audit of an organization..

iii.      To assess the benefit of using a computer to audit and organizations account.

RESEARCH  HYPOTHESES

The following questions have been prepared for the study:

i.          What is the influence of  computer in the audit of an organization?

ii.        What are the challenges in the use computer for audit of an organization?

iii.      What are the benefit of using a computer to audit and organizations account?

   SIGNIFICANCE OF STUDY

This research is important because it examines how accountants/ auditors are taking the challenges by the use of computers. It will as well examine the relevance of computer to accountants, the basis for determining whether to change from manual to computerized system. The efficiency of computer system as compared with manual system and the problems of the computerized accounting/ Auditing systems.

The project will also help readers of this project to have a useful idea of computerized and auditing system and recommend the area for further research in the field of computer as related to auditing and accounting.

The study will be significant to the academic community as it will contribute to the existing literature.

 SCOPE OF THE STUDY

This study will examine the influence of  computer in the audit of an organization. The study will also find out the challenges in the use computer for audit of an organization. The study will further assess the benefit of using a computer to audit and organizations account. Hence this study will be delimited to Tastia restaurant Abuja.

    LIMITATION OF THE STUDY

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection (internet, questionnaire, and interview), which is why the researcher resorted to a moderate choice of sample size. More so, the researcher will simultaneously engage in this study with other academic work. As a result, the amount of time spent on research will be reduced.

DEFINITION OF TERMS

Computer: an electronic device for storing and processing data, typically in binary form, according to instructions given to it in a variable program.

Audit:  an official inspection of an organization’s accounts, typically by an independent body.