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AN EVALUATION OF THE
ROLE OF AUDITING IN A COMPUTERISED SYSTEM
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF STUDY
The origin of auditing
The practice of auditing had the origin in the necessity for
the institution of some system upon person whose business it was to record the
receipt and disbursement of money on behalf of others.
When a
company is established under the companies and allied matters act 1990, as
public company, the mining of such company is normally vested in the care of
management the earners of the business i.e. the shareholders are usually not
involved in the day to day activities of the company, there is thus the need
for ran independent person or group of persons to examine the record on behalf
of the owners the person (s) whose duty it was to report on such record to the
owners is the “auditor”. The word “audit” was derived from the Latin word
“audile” meaning to hear.
In medieval
Britain, auditor were appointed by feudal Barons to ensure that the revenue
produced by their serfs and tenant revenues farmers were accurately accounted
for and that their serfs were not cheating or hiding revenue due for the
landlord. The landlord rarely became involved in the management of their
estates and would simply rely upon the properly verified or substantiated
accounts of their employees.
However, in
the remote times, auditors works were portrayed in ancient Egyptians wall
painting and their activities were recorded in the writing of the early Roman
empire. During this period, audit was confined to ascertaining whether the
acting party had properly accounted for the receipt and all the payment on behalf
of his principal. This made the acting party just merely a cash auditor. The
modern audit however, include not only cash transaction but also the
verification of the finance position disclosed by the balance sheet and the
profit and loss account of the undertaking
Definition and scope of auditing
Definition there are various definition given to auditing by
different bodies but having the same meaning.
The
international auditing practice committee (IAPC) has defined an audit as “an
independent examination of and the expression of an opinion on the financial
statement of an enterprise by an appointed auditor in accordance with the terms
of his engagement and in compliance with relevant statutory obligation and
professional requirement.
The auditing standard and guideline of the
consultative committee of the accountancy body (CCAB) has defined an audit as
an independent examination of an expression of opinion on the financial
statement of an enterprise by an appointed auditor in pursuance of that
appointment and in compliance with any relevance statutory obligation”.
Okolo JUT
(1987) expressed that “an audit could be conscientious objective examination of
and inquiring in any statement of account relating to money in money worth, the
underlying document and the physical assets where possible will enable the
auditor to form an opinion as to whether or not the statement of account
present a true and fair view of whatever it purport to represent and to report
accordingly”.
Scope of an audit
By scope of an audit, we mean the area which the audit work
covers. It bothers on critical examination and verification of the accuracy of
a financial statement by an independent
auditor and this scope depend on a number of actors such as:
vThe type of audit work to be carried out
vThe size of the organization
vThe nature of the business concerned
vThe skill and experience of the staff involved
vThe qualification of the staff involved and
vThe objective of such audit
Nature and purpose of auditing
vNature of an audit:
The day to day running activities of the company is vested on
the directors. Their responsibility is to ensure that the possibility of fraud
and error is reduced if not eliminated; they set up a system of internal control
for various check and procedure in order to control the recording of the
business transaction. Upon engagement of the auditor for any audit assignment,
the work is performed at the event premises.
The audit work is a two stage operation for each year in
which case, the first stage is a system audit whereby the audit is conducted to
a particular date within the accounting period this first stage is also known
as interim audit
Stage two is that the audit is carried through to completion
in one continuo’s session which involves verification of items in the final
accounts.
Audit are performed by audit team comprising of audit
trainees and qualified accountant. A manager will oversee their work while the
actual audit is signed by one of the partners in the name of the audit firm.
Purpose of an audit
The main and statutory
object of an audit is to give a report on the view presented by the account and
statement prepared by the client and his staff in accordance with the term of
the audit appointment. The above object is the primary purpose of an audit, in
which case the auditor is to conduct such test and enquires as he considers
necessary to form his opinion.
However,
other secondary purpose includes:
vTo detect errors and fraud
vTo prevent errors
vFraud by the deterrent and moral effect of the audit
vTo provide spin – off effect,
vAssisting client with a accounting system taxation service
vFinancial and other consultancy work
1.2 THE
ELECTRONIC DATA PROCESSING SYSTEM
The advent of electronic data processing (EDP) or computer
has had a great influence on the auditing processes
Auditors have
always been concerned with problem associated with making time and fair report
and form their trailing and experiences, they are able to handle these
difficulties. Before the advancement of the data processing technology or
computer, the processes of auditing, accounting and other business data were
carried out manually.
Development
in computer technology are changing the art and science of auditing which
complement book keeping and accounting practice of modern business world.
Computer is
now taking over the traditional purpose of accountant. Like calculation and
data processing within business enterprises.
In order to
be able to function effectively the new generation of auditor need to acquaint
them with a working knowledge of computer operation and technique of data
processing in a computer based accounting environment.
Auditor of
today needs not be a computer export,
but he must be computer literature in order
to monitor the work flow. As a result of the forgoing fact, the student
of ICAN professional examination II are expected to write or be tested on
management information service (MIS) to acquaint themselves with computer term
and appreciation.
As the use of
computer is irrelevant to the accounting and auditing concept, the only
compelling reason for the use of computer in accounting courses is that
accountant need to deal with computer based accounting information system and
their subsequent auditing.
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