Technology- An Advantage or Hindrance to Auditing

• Auditing and Assurance
• ||
• August 28, 2020

In this century, we have eye witnessed what may have been the greatest revolution in history, the limitations of human existence are overpowered by the advance in technology. Now we can communicate across the globe so that we can overcome distance barriers. We are surrounded by the slave technology of automation and computers that does things for us now we once did ourselves.

When a business operates in a more automated environment, it is likely there will be several business functions and activities happening with the systems. Companies derive benefit from the use of IT systems to carry out various business operations and activities and hence auditors need to understand the relevance of these IT systems to an audit of financial statements. IT systems and automation benefit the business by making operations more accurate, reliable, effective and efficient, but such systems also introduce certain risks which need to be considered, assessed and addressed by management and even auditors are required to understand, assess and respond to such risks.

Some of the reasons why IT has brought a substantial uplift in the growth of businesses are:

• Automation has enabled faster business operations leading to more effectiveness and efficiency. While transacting with Flipkart and Amazon, the processing is usually completed in not more than 2 minutes.
• Computation and calculation are automatically carried out which helps in accuracy in data processing and computation. For example, Bank interest calculation and inventory evaluation.
• We are able to process large volumes of transaction without malfunctioning through technology. IRCTC carries out millions of transactions every day without a glitch.
• Business operations are easily integrated with each other. In ERP, all the departments are interrelated ensuring there is no delay in functioning. The Production department has access to the necessary information of the Purchase department to carry operations.
• The information is more securedand there are controls to mitigate the risks to assure security. User Access and security are controlled by assigning system roles to users. To protect data loss and frauds, passwords and biometrics are used.
• Due to less involvement of humans in performing different business operations, there will be less human errors and mistakes. ATM involves automation of cash withdrawal due to which error in counting and processing is negligible.
• IT helps us to be up to date by providing latest information and taking off the outdated information.     

If you own or manage a business that uses more of IT, it is essential to understand the risks to your IT systems and data, to mitigate or control those risks, and to evolve an action plan in the event of an IT crisis. Business owners have bounding obligations in relation to privacy, electronic transactions, and personnel training that affect IT risk management strategies. An auditor should understand the risks that arise from the use of IT systems:

• Direct data changes or loss of data;
• Excessive access/ Privileged Access;
• Inaccurate processing of data, processing inaccurate data, or both;
• Unauthorized access/ changes to programs and systems;
• Failure to make necessary changes; and
• Lack of adequate segregation of duties.

After taking into consideration the above points, it can be concluded that IT risks include hardware and software failure, human error, spam, viruses and malevolent attacks. But these IT risks can be managed by making a complete business risk assessment. Coming up with a business continuity plan can help recover business from an IT incident.

To help shield your IT systems and data you should:

• secure computers, servers and wireless networks;
• use anti-virus and anti-spyware protection, and encrypted firewalls;
• regularly update software to the latest versions;
• use data reserves that include off-site or secluded storage;
• secure your passwords;
• upskill staff in IT policies and procedures; and
• understand legal requirements for online business.

To sum it up, we end up living inside an artificial environment that serves to our needs, in which we constantly exploit technology in ways that expand our freedom and power, and permit us to cut across many of the restraints of existence.

Here at AJSH, we assist our clients in internal audits, forensic audits, statutory audits, setting up business in India, accounting, bookkeeping, payroll, auditing, taxation, secretarial compliances, trademark registration, business structuring and advisory services. If you would like to know more IT based audits, kindly contact us.