Acc 651 - Information Systems Control & Audit

1. Acc 651 - Information Systems Control & Audit Presented by: Grant Thornton LLP Mike Lane, M. Acc, CA Lisa Schoenberger, M. Acc, CA Scott Shannon, M. Acc, CA, CMA, CBV March 12, 2002 University of Waterloo J. Efrim Boritz, PhD, FCA

2. Focus of our Presentation • Brief outline of IDEA features including Import Assistant • Why Grant Thornton uses IDEA • Examples of IDEA (audit value & management value) • Data transfer issues • Parsim Inc.

3. IDEA Features • Import Assistant • step by step guide to importing files • RDE (Record Definition Editor) • DataImport for IDEA • Powerful @ Functions (Str, Abs, Mid, Dtodays)

4. Additional Features • Virtual (computed) Fields • Sampling • Automatic History Documentation • Resource Materials • manuals in electronicformat • Internet site www.caseware-idea.com • on-line help

5. Why Grant Thornton Uses IDEA • June 1996 article by Karla Tays-Dunphy, CA, CISA (provided by email to Professor Boritz) • increased efficiency and productivity • automates manual tasks • perform analysis that is difficult to do manually

6. Why Grant Thornton Uses IDEA (continued) • audit paperless systems • meet client expectations • provide general audit staff with the most productive tools • provide value-added tools • evaluate the impact of error in the sample

7. Examples of IDEA Analysis Audit Items • Export of sample such as A/R confirmations to a word processor mail merge format • Reperform the aging of A/R • Recalculate an inventory listing • Extract slow-moving inventory

8. Additional Examples • Match inventory test counts to physical inventory file and then to final perpetual inventory • Identify and extract related party transactions

9. Additional Examples • Extract loans with unusual interest rates • Recompute accrued interest on all loans • Identify delinquent loans based on most recent payment or due date extraction • Extract items for cut-off testing

10. Additional Examples • Select high dollar value transactions for additional review • Extract unusual G/L entries • Summarize job cost data by job for gross profit analysis • Detailed analysis of payroll (e.g. 25 highest pays, pays with the largest number of overtime hours, etc.)

11. Additional Examples Non-audit items • Import the client's trial balance and then export it in a format that is supported by working paper software • Repair of client data • Generate specialized reports for clients

12. Current Practice Applications Credit Union • Audit procedures plus a consulting engagement • Audit recalculations – complete recalculation of accrued interest plus testing of loan delinquency • Consulting - client paying “patronage” dividends to its members based on their business with the CU • summarize loans and deposits for 12 months, calculate averages, calculate dividend amount and export to Lotus

13. Current Practice Applications Education Savings Plan • audit engagement • charges to subscribers are based on prospectus (100%) • use of virtual fields and prospectus terms to identify discrepancies • extract items that do not comply with the prospectus • helped client substantially improve program

14. Data Transfer Issues • Data Transfer is an issue that must be addressed • Not as difficult as it was even two or three years ago • Bundling of DataImport for Windows to import print report files - helps significantly

15. Popular Transfer Methods • Popular ways to transfer data between microcomputers include: • copying the data to a diskette on the client's computer and then onto the hard drive of your microcomputer • If the data file will not fit on one diskette, consider using a compression program such as PKZip or WinZip

16. Popular Transfer Methods(continued) • For significant data files( >2 MB), use the Infrared date transfer capabilities or connect the two microcomputers with a cable and then transfer the file • Determine what export capabilities are available in the accounting software. The best format is dBASE (a record definition is automatically generated)

17. Popular Transfer Methods(continued) • If the client's software does not have an export capability, it may be possible to print the desired information in a report format to a file. This file may then be imported into IDEA using the DataImport for IDEA • Obtain the layout of the data files so that you can generate a record definition. The software vendor may also create a program to convert the data to a format readable by IDEA

18. Def’n, design, execution and control • define audit objectives • what to prove - indicate type of test and test data to be used • selection of appropriate technique • based on objective, degree of audit assurance required, techniques that are available, cost/benefit factors • consider training, support, time constraints

19. Def’n, design, execution and control • Feasibility Considerations • significance of audit effort and time required • more efficient? • may be the only way to achieve audit objective • availability and sequence of data files • make sure available in readable form, • watch retention policies

20. Parsim Inc. Performance of Audit Tests • re-calculation of bonus • determination of correctness of bonus • Dealing predominantly with bonus accrual

21. Parsim Inc. (continued) Procedures to Add Value • unusual years of seniority • no absences (no holidays, no days absent) • unusual monthly salaries • unusually high absences • unusually high premium amounts Providing information to management to help them run their business (+ audit value)

22. Questions?

23. Thank you!