THE IMPACT OF COMPUTER IN AUDITING

ABSTRACT

The financial statements of a business entity are very crucial to both internal and external parties interested in its economic history, current financial health and prospects for the future. The preparation and presentation of these statements are major functions of the accounting system. Prior to the presentation, sections 359-360 of CAMA 1990 mandate the auditors to carry out such examinations and investigations to enable them form an opinion. These examinations and investigations for many decades were done manually. However, the advent of computers used in the processing and production of accounting information created a number of challenges for the auditors. It is against this backdrop that this study appraised the impact of computer in auditing. The researcher employed both primary and secondary sources of data collection and the techniques of analyses utilized in this study are the Z-score and the Pearson Product Moment Correlation Coefficient. Eleven (11) audit firms out of a population of nineteen (19) recognized by both ANAN and ICAN for the audit of quoted companies in Nigeria were studied based on judgmental sampling. The period covered was five (5) years from 2001-2006. Results of the study showed that computer application to auditing does not affect the duties of the auditors. Secondly, computer application to auditing greatly enhanced effectiveness and reliability of evidence collection and evaluation. Thirdly, there is a significant relationship between computer application and the incidence of loss of audit trail. Consequently, the following recommendations are made: The application of computer packages should be broadened to enhance more effective and reliable decisions. Secondly, auditors should be actively involved in the design and installation of audit packages in computer systems. Again, training and re-training of auditors should be re-intensified to enhance effectiveness and efficiency of computer auditing. Audit firms in Nigeria should initiate research programmers’ for new and improved audit methods and packages for automatic retrieval of audit trail and the Departments of Accountancy in our higher institutions of learning should have computer laboratories packed with audit software for practical teaching and acquisition of knowledge in this vital area.

CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND OF THE STUDY

Every Organization, profit oriented or non-profit oriented makes use of economic resources in an attempt at attaining its goals or objectives. Such an organization also engages in financial transactions in the course of its operations. More so, in a monetized economy such as ours, the task of maintaining records of financial transactions is very crucial to the survival and sound performance of the organization. Today, since most businesses are owned by shareholders and managed by directors who are appointed by the former, there is therefore the need not only for the preparation, analysis and interpretation of financial statements but most importantly the presentation of these statements for meaningful and useful judgments and decisions (Millichamp, 1996).

Prior to the presentation of the financial statements, sections 359 – 360 of the Companies and Allied Matters Act (CAMA, 1990) mandate the auditors to carry out such examinations and investigations as may enable them to form an opinion. The owners who appoint the directors as stewards are concerned with what happens to their investments.  These directors are expected to render stewardship Accounts to the shareholders.  These accounts are usually presented by means of financial statements best known in form of Profit and Loss Account, Balance Sheet, Directors Report and Cash Flow.  These statements are produced in most cases; annually and as such form the Annual Report and Accounts.  All parties who use the annual report and accounts need to be able to believe and rely on them and auditing is the means by which this belief is obtained. Kamar (1996:1) views auditing as involving an examination and evaluation of the authenticity of a set of financial statements and the underlying books and records which results in the auditor providing an opinion on the true and fair view of those financial statements.  Auditing is an independent examination of the financial statements of an organization with a view to expressing an opinion as to whether these statements give true and fair view and comply with the relevant statutes (Aguolu, 2002)