Case 1:The CARE Corporation uses an IBM mainframe computer system with peripheral optical reader and high-speed laser printer equipment. Transaction information is initially recorded on paper documents and then read by optical equipment that produces a magnetic disk containing the data. These data file disks are processed by a computer program, and printed listings, journals, and general ledger balances are produced on the high-speed printer equipment.Required:Explain how the audit standard requiring “adequate technical training and proficiency” is complied with the audit of CARE Corporation’s financial statements. Case 2Increasing use of sophisticated EDP systems has produced significant changes in the accounting environment. Some of these changes are the following:documents that are used to enter information into the computer may exist for only a short time or only in computer-readable form. In some computer systems, input documents may not exist at all, because information is entered directly into the system.Computer processing uniformly subjects like transactions to the same processing instructions.Many internal control procedures, once performed by separate individuals in manual systems, may be combined in systems that use computer processing.The potential for individuals to gain unauthorized access to data or assets may be greater in computerized accounting systems than in manual systems.Required:For each of the changes, discuss the impact on the internal control system and the independent audit.

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Answered: Increasing use of sophisticated EDP…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

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Case 1:

The CARE Corporation uses an IBM mainframe computer system with peripheral optical reader and high-speed laser printer equipment. Transaction information is initially recorded on paper documents and then read by optical equipment that produces a magnetic disk containing the data. These data file disks are processed by a computer program, and printed listings, journals, and general ledger balances are produced on the high-speed printer equipment.

Required:

Explain how the audit standard requiring “adequate technical training and proficiency” is complied with the audit of CARE Corporation’s financial statements.

Case 2

Increasing use of sophisticated EDP systems has produced significant changes in the accounting environment. Some of these changes are the following:

documents that are used to enter information into the computer may exist for only a short time or only in computer-readable form. In some computer systems, input documents may not exist at all, because information is entered directly into the system.
Computer processing uniformly subjects like transactions to the same processing instructions.
Many internal control procedures, once performed by separate individuals in manual systems, may be combined in systems that use computer processing.
The potential for individuals to gain unauthorized access to data or assets may be greater in computerized accounting systems than in manual systems.

Required:

For each of the changes, discuss the impact on the internal control system and the independent audit.

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