NCJ Number
66115
Journal
GAO Review Volume: 12 Issue: 3 Dated: (SUMMER 1977) Pages: 59-63
Date Published
1977
Length
5 pages
Annotation
A SYSTEMS APPROACH TO AUDITING FINANCIAL OPERATIONS IS DESCRIBED, FOCUSING ON THE PROCEDURES INVOLVED IN OBTAINING, PROCESSING, RECORDING, AND REPORTING FINANCIAL INFORMATION.
Abstract
SINCE THE PROCESSING OF LARGE VOLUMES OF TRANSACTIONS HAS BECOME COMMONPLACE IN FINANCIAL OPERATIONS, THE AUDITOR IS FORCED TO EXAMINE THE SYSTEMS THAT GENERATE FINANCIAL INFORMATION. SYSTEMS ARE COMPOSED OF ELEMENTS THAT WORK TOGETHER TO ACHIEVE THE OVERALL PURPOSE OF THE SYSTEM. SYSTEMS WITH A FINANCIAL OBJECTIVE MAY INVOLVE THE PURCHASE OF AN ASSET OR SERVICE, THE SALE OF AN ASSET OR SERVICE, THE PRODUCTION OF ASSET, THE PAYMENT OF EMPLOYEES, OR OTHER ELEMENTS. IN A SYSTEMS APPROACH, THE AUDITOR EVALUATES THE PROCEDURES AND FUNCTIONS IN EACH SYSTEM TO DETERMINE IF THE PROCEDURES PROVIDE ADEQUATE CONTROLS THAT WILL PRODUCE RELIABLE FINANCIAL INFORMATION. BECAUSE OF THE COMPLEXITY OF THESE SYSTEMS, THE AUDITOR'S EFFORT MUST BEGIN WITH A STUDY OF THE SYSTEM, FOLLOWED BY THE EVALUATION. THE SYSTEM STUDY CONSISTS OF OBTAINING AN UNDERSTANDING OF THE SYSTEM, RECORDING THE UNDERSTANDING, AND CONFIRMING THE UNDERSTANDING. THE SUBSEQUENT EVALUATION DETERMINES WHETHER CONTROLS DOCUMENTED AND CONFIRMED IN THE UNDERSTANDING ARE EFFECTIVE. THIS INVOLVES CONDUCTING TESTS TO PROVIDE ASSURANCE THAT CONTROLS IN EXISTENCE AT THE TIME OF THE STUDY HAVE BEEN IN EXISTENCE THROUGHOUT THE PERIOD UNDER REVIEW, AND TO DETERMINE THAT CONTROLS HAVE BEEN CORRECTLY PERFORMED. EVALUATION SHOULD ALSO DETERMINE WHETHER CONTROLS ARE COMPREHENSIVE ENOUGH TO PRODUCE RELIABLE INFORMATION. THE SYSTEMS APPROACH IS EXPECTED TO REDUCE THE TOTAL TIME AND EFFORT NEEDED TO REVIEW FINANCIAL OPERATIONS WHILE INCREASING THE AUDITOR'S CONFIDENCE IN THE RELIABILITY OF FINANCIAL REPORTS. (RCB)