THE IMPACT OF COMPUTERIZED ACCOUNTING SYSTEMS ON RISK BASED INTERNAL AUDITING IN NIGERIA MANUFACTURING INDUSTRY
CHAPTER ONE: INTRODUCTION
Background of the Study
IT evolution in auditing and accounting is believed to have started several decades slightly over 50 years in the past with the first functioning commercial computer (Fadzil et al., 2005). Accounting techniques of several public and private entities whether large or small have been computerized. Additionally, it is claimed that there ought to be thorough considerations of the controls in a high-tech situation, and their influence on the auditor’s valuation of risk, and the consequent internal audit techniques. The above- mentioned measures are thought to frequently comprise using computer-assisted audit techniques (CAATs) as stipulated by ACCA (2011). Jones and Young (2006), argued that electronic data process (EDP) auditors later formed the independent audit body known as the Electronic Data Processing Auditors Association (EDPAA). Key objective of the association formed was to formulate policy guidelines, control procedures, and internal audit principles for electronic data processing auditors.
Heidenhof, 2002 in his study asserted that, “In early 1990s, African countries began to focus on the improvement of public finance specifically, on budget and expenditure management reforms”. The foregoing is said to have been occasioned by donors’ concerns. African countries commenced a critical review of hitherto existing systems and processes in their governments. Due to the realization that the existing systems and processes were outdated, integrated financial management systems (IFMIS) was recommended for piloting. IFMISs is an oracle application software tool tailored to suit financial management tools that incorporate the use of computerized systems. According
to a report by the United States Agency for International Development (USAID, 2008), the scope and scale of IFMIS can vary.
Jones and Young (2006) in their study argued that EDP auditor molded the EDPAA. The objective of the association was to yield measures, policies and morals for EDP auditors. The initial edition of (control Objectives) was published in the year 1977, this publication is now known as, “Control Objectives for information and related Technology (CobiT)”. It is the set of commonly recognized information technology control goals for information technology auditors. In 1994, EDPAA was integrated to (Information Systems Audit and Control Association) ISACA.
What marks this research stimulating is due to numerous academicians who are swift to argue out the necessity for internal auditors to adopt to variations brought about with information technology development, however acknowledging how these variations impacted on internal auditors have not been adequately investigated. While some papers view computerized accounting systems as increasing audit related risk, it is essential to understand how these changes in the accounting process can develop the work of the internal auditors or else this proves that actually there is a necessity to evaluate and study other studies.
Computerized Accounting System
According to Weber (2011), “Computerized accounting system (CAS) involves the use of computers in processing accounting data into information to facilitate quick decision making through timely preparation of financial reports and financial reporting in this case refers to the way in which financial information is recorded, processed and conveyed to the end users of this information in particular”.
Accounting system use to be manual process using paper, books and documents for business information, however accounting in the recent past has been computerised i.e. it involves the use of computers to process the financial transactions. Advances in information communication technology (ICT) have generated substantial changes in the field of business operations in conjunction to software in accounting. It has been proved that a computerized accounting system has several advantages such as speed, accuracy and reliability of financial information compared to a manual accounting system Osmond (2011). Before the advent of ICT in accounting practice, these bookkeeping practices were being executed manually. Nevertheless, nowadays several certified public accountant and data capturing clerks choose to use accounting software to record, report and analyse their organisation’s financial information. This information is collected from transactions and is compiled into financial reports (Weber, 2011).