Information Systems Auditing

Instructor: Chris Westland, PhD, CPACertified Public Accountant (Texas License 17277)

ISMT300T Information Systems Auditing

Time: Wed & Fri 10:30am-12noon

Venue: Rm. 3219

Duration: 1 Sep - Dec 6

Today’s Topics

What is IS Auditing?

oCourse OrganizationoWhat is IS Auditing?oWhy is it Important? oWhat is the Industry Structure?oAttestation and AssuranceoAccounting Irregularities and Financial Fraud (Video)

ScheduleWeek Topic Readings Practicum

Competency Case Study

1-Sep-055-Sep-05

What is Information Systems (IS) Auditing?

Industry Profile: The Job of the IS Auditor

12-Sep-05

Identifying Computer Systems Chapter 1 Evaluating IT Benefits and Risks Jacksonville Jaguars

19-Sep-05

IS Audit Programs Chapter 2 The Job of the Staff Auditor A Day in the Life of Brent Dorsey

26-Sep-05

IS Security Chapter 3 Recognizing Fraud The Anonymous Caller

3-Oct-05 Utility Computing and IS Service Organizations

Chapter 4 Evaluating a Prospective Audit Client Ocean Manufacturing

10-Oct-05 Physical Security Chapters7 Inherent Risk and Control Risk Comptronix Corporation

17-Oct-05 Logical Security Chapter 8 Evaluating the Internal Control Environment Easy Clean

24-Oct-05 IS Operations Chapter 9 Fraud Risk and the Internal Control Environment

Cendant Corporation

31-Oct-05 Controls Assessment Chapter 10 IT-based vs. Manual Accounting Systems St James Clothiers

7-Nov-05 Encryption and Cryptography Chapter 11 Materiality / Tolerable Misstatement Dell Computer

14-Nov-05

Computer Forensics Chapter 12 Analytical Procedures as Substantive Tests Burlington Bees

21-Nov-05

New Challenges from the Internet: Privacy, Piracy, Viruses and so forth

Chapter 13 Information Systems and Audit Evidence Henrico Retail

28-Nov-05

Auditing and Future TechnologiesCourse Wrap-up

Chapter 16 Flowcharting Transaction Cycles Southeast Shoe Distributor

Logical Structure of the CourseWith Readings from the Text

I S Au d itin g

C u r r en t an d F u tu r eI s s u es in I S Au d itin g

C h . 1 3

I S C o m p o n en tsC h . 1 & 2

Au d it C o m p o n en tsC h 3 & 4

C o n tr o ls o v er I SAs s ets

C h . 7 & 8

P r o c ed u r a lC o n tr o ls

C h . 9

Au d it S tan d ar d san d P r o c ed u r es

C h . 1 0

C r im in al an dF r au d Au d its

C h . 1 2

En c r y p tio nC h . 11

Prac·ti·cum (prăk-tĭ-kəm) nounLessons in a specialized field of study designed to give students supervised practical application of previously studied theory

  Student Competence Case Study

1 Evaluating IT Benefits and Risks Jacksonville Jaguars

2 The Job of the Staff Auditor A Day in the Life of Brent Dorsey

3 Recognizing Fraud The Anonymous Caller

4 Evaluating a Prospective Audit Client Ocean Manufacturing

5 Inherent Risk and Control Risk Comptronix Corporation

6 Evaluating the Internal Control Environment Easy Clean

7 Fraud Risk and the Internal Control Environment Cendant Corporation

8 IT-based vs. Manual Accounting Systems St James Clothiers

9 Materiality / Tolerable Misstatement Dell Computer

10 Analytical Procedures as Substantive Tests Burlington Bees

11 Information Systems and Audit Evidence Henrico Retail

12 Flowcharting Transaction Cycles Southeast Shoe Distributor

Preliminaries: Evaluation

http://teaching.ust.hk/~ismt300t Chapter Spot Tests 50% Midterm Examination 20% Final Examination 20% Class Participation 10%

What is Auditing?

E x ter n a l R ea lW o r ld E n tit ies

an d E v en ts th a tC r ea te an d

D es tr o y Valu e

Au d it R ep o r t /O p in io n

J o u r n a l E n tr ies

'O w n e d ' A s s e t sa n d Lia b ilit ie s

R ep o r ts :S ta tis t ic s

I n te r n a lO p er a tio n so f th e F ir m

Ac c o u n tin gS y s tem s

Au d itP r o g r am

T r an s ac tio n s

T ra n sa c tio n s

The P hys i c al W o r l d

The P ar al l e l (L o g i c al )W o r l d o f Ac c o unt i ng

L ed g er s :D atab as es

Audi t i ng

C o r p o r a te L aw

Su b

stan

tiv e

Tes

ts

Te st s of T

ra n sa c t io ns

Atte s ta tio n

A n a ly tic a l T ests

What is Auditing?Nature of work

• Accountants prepare, analyze, and verify financial reports and taxes, • and furnish this information to individuals and managers in

business, industry, and government

• The three major fields in accounting are:• Auditing• Public Consulting• Corporate / Internal

Public Accounting

Auditor: An auditor examines an organization's financial statements, verifies the accuracy of the financial records, examines management procedures and internal controls to ensure accuracy, and checks for mismanagement, waste, or fraud. The auditor may review company operations compliance with corporate

policies, laws, and government regulations. The auditor, or reports to investors and authorities such as the federal government that financial statements have been prepared and reported correctly.

Other Public: Public accountants perform accounting, auditing, tax, and consulting activities for public accounting firms, their own businesses, governments, nonprofit organizations, or individuals. Typically, accountants specialize in one aspect of accounting, concentrating

on taxes or bankruptcies, for example. Some become consultants who offer advice on compensation, employee benefits, the design of accounting processing systems, or how to safeguard assets.

Corporate / Internal

Often called management, industrial, or corporate accountants, private accountants record and analyze financial information for the employer and prepare financial reports for stockholders, creditors, regulatory agencies, and tax authorities. Duties may include budgeting, performance evaluation,

cost management, and asset management. An accountant also may work as part of an executive team in strategic planning or new product development.

Entry-level private accountants often start as cost accountants, junior internal auditors, or as trainees for other accounting positions.

Qualifications

Auditors must have: ability to analyze, compare, and interpret facts and figures quickly; and be able

sound judgments based on this information. should have good oral and written communication skills, well-developed

interpersonal skills, and ability to work in cross-functional teams.

Business systems and computer skills are required.

Some employers prefer hiring individuals with a master's degree in accounting or a master's degree in business administration.

Most want to hire someone who is familiar with computers and accounting and internal auditing software applications.

Changing legislation regarding taxes, financial reporting standards, international competition, business investments, mergers, and other financial matters require accountants and auditors to continuously update their knowledge.

CPAs

Most accounting positions require at least a bachelor's degree in accounting or a related field.

Based on recommendations made by the American Institute of Certified Public Accountants (AICPA), certified public accountant (CPA) candidates must complete 150 semester hours of college coursework – an additional 30 hours beyond the usual four-year bachelor's degree to become licensed.

CPA certificate applicants to have some accounting experience. Almost all states require a CPA and other public accountants to complete a minimum number of hours of continuing education before a license can be renewed.

Employment Outlook

Job opportunities for accountants are expected to grow 10 to 40 percent per year through 2006 due to the increasing number of new businesses spurred by China’s growing economy.

Jobs with major accounting and business firms remain the most sought after by new graduates.

More jobs will be available replacing thousands of accountants and auditors who retire or transfer to other occupations each year.

Accountants and auditors who have earned certification or licensure or who have advanced degrees will have the best job prospects.

(Where Do Information Systems Fit in?)

Compare an Accounting Department in the early 1900s

(Where Do Information Systems Fit in?)

With an Accounting Department in the 1970s

(Where Do Information Systems Fit in?)

With an Accounting Department Today (well … not everywhere, but you see the potential….)

(Where Do Information Systems Fit in?)

With an Accounting Department of 2020 (… at least my prediction….)