Information Technology Auditing, 4th Edition Solution Manual

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CHAPTER 1AUDITING AND INTERNAL CONTROLREVIEW QUESTIONS1.What is the purpose of an IT audit?Response: The purpose of an IT audit is to provide an independent assessment of sometechnology-or systems-related object, such as proper ITimplementation, or controls overcomputer resources. Because most modern accounting information systems use IT, ITplays a significant role in a financial (external audit), where the purpose is to determine thefairness and accuracy of the financial statements.2.Discuss the concept of independence within the context of a financial audit. How isindependence different for internal auditors?Response: The auditor cannot be an advocate of the client, but mustindependentlyattest towhether GAAP and other appropriate guidelines have been adequately met. Independencefor internal auditors is different because they are employed by the organization, and cannotbe as independent as the external auditor. Thus internal auditors must use professionaljudgment and independent minds in performing IA activities.3.What are the conceptual phases of an audit? How do they differ between generalauditing and IT auditing?Response: The three conceptual phases of auditing are:i. Auditplanning,ii. Testsofinternal controls, andiii. Substantivetests.Conceptually, no difference exists between IT auditing and general auditing. IT auditing istypically a subset of theoverall audit; the portion that involves computer technology is thesubset.4.Distinguish between the internal and external auditors.Response: External auditors represent the interests of third-party stakeholders in theorganization, such as stockholders, creditors, and government agencies. External auditing isconducted by certified public accountants who are independent of the organization’smanagement. Internal auditors represent the interests of management. Internal auditingtasks include conducting financial audits, examining an operation’s compliance with legalobligations, evaluating operational efficiency, detecting and pursuing fraud within the firm,and conducting IT audits. External auditors also conduct IT auditsas a subset of financialaudits.5.What are the four primary elements described in the definition of auditing?Response:a.auditing standardsb.systematic processc.management assertionsand audit objectivesd. obtainingevidence6.Explain the concept of materiality.Response: Materiality refers to the size of the effect of a transaction. From a cost-benefitpoint of view, a threshold is set above which the auditor is concerned with the correctrecording and effects of transactions. Rather than using standard formulas, auditors use

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