Tag (SQ): Software Development

Cal & Co has been appointed as the auditor for Mount Co, a company providing motor vehicle repair services across 25 locations, with a year-end of 30 June 2009 and an audit completion deadline of 15 August 2009. Each location uses the same computerized inventory, sales, and purchasing systems, with data consolidated monthly at the head office. The audit manager is planning the audit approach, considering rewriting Cal & Co’s audit software to test Mount Co’s inventory systems on a live basis. However, July is a major holiday period for the audit firm, posing potential resource constraints

(a) (i) Explain the benefits of using audit software in the audit of Peak Ltd.

(a) (ii) Explain the problems that may be encountered in the audit of Peak Ltd and for each problem, explain how that problem could be overcome.

(b) Following a discussion with the management at Peak Ltd you now understand that the internal audit function is prepared to assist with the statutory specification on the computerised inventory systems at Peak Ltd. Documentation provides details of the software and shows diagrammatically transactions are processed through the inventory system. This documentation can be used to significantly decrease the time needed to understand the computer systems and enable audit software to be written for this year’s audit.

Required:

Explain how you will evaluate the computer systems documentation produced by the internal audit function in order to place reliance on it during your audit.