Because resources are usually limited, not all applications can be audited each year. What factors should an internal or external auditor consider when deciding which applications to audit?
What will be an ideal response?
Answer: Suggested answer:
Factors which should influence the selection of application areas to audit include the following:
• How critical the application is to the successful operation of the company
• How subject the application is to fraud or some serious financial error
• How critical the application is in terms of its effect on balances in the financial statements (application areas may also be critical in terms of appropriate disclosures in the financial statements)
• Has there been audit involvement in the development of the application (do ITF or embedded audit modules exist in the program code of the application from its development phase)
• The results of the last audit of the application
• The length of time elapsed since the last audit of the application
• The availability of cost-effective audit techniques to audit the application
Frequently a rotating system of application selection is used to select audit areas, with each application being audited according to some multiyear schedule. This allows for the majority of applications, if not all, to be examined over a given period of time.
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