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Auditing in a computerised system

Unit: Audit & Assurance

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Practice CPA Audit & Assurance Auditing in a computerised system questions with detailed answers and explanations.

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August 2026

 2 Questions
Question 2
​​Premium Ltd. manufactures cleaning detergents for supermarkets and public institutions. The company recently implemented an integrated production and inventory system that automatically records movements of raw materials, work-in-progress and finished goods. The system calculates standard material usage for each production batch and permits authorised adjustments where wastage, spoilage or rework occurs. 

 You are the audit senior at Tumaini & Co., Certified Public Accountants, the external auditors of Premium Ltd. You have been assigned to perform preliminary audit planning procedures and obtain an understanding of the new system before the year-end audit.

During your preliminary review, you noted the following matters: 
 1. User access rights have not been reviewed since the system was implemented. 
 2. Production supervisors can initiate and approve adjustments for wastage and rework. 
 3. Exception reports identifying unusual production quantities and inventory adjustments are generated but are not reviewed by management. 
 4. Finished goods may be released from the warehouse before dispatch documents are matched to approved customer orders. 
 5. The internal audit department has not undertaken a post-implementation review of the system. 

Required: 
(a) Explain THREE control deficiencies in the production and inventory system and, for each deficiency, state its possible effect on the financial statements of Premium Ltd. 

(b) Recommend TWO information technology controls that Premium Ltd. should implement to ensure that access to the system and changes to inventory data are properly restricted and monitored. 

(c) Describe THREE tests of controls that Tumaini & Co. should perform to determine whether wastage and rework adjustments are independently authorised, exception reports are reviewed and followed up, and finished goods are dispatched only against approved customer orders.

(d) Explain TWO benefits that Premium Ltd. would obtain from a post-implementation review of the new production and inventory system.


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Question 5
​​Times Ltd. operates an e-commerce payment gateway used by small traders to receive customer payments. Before a trader is permitted to use the platform, Times Ltd. reviews and approves the trader’s merchant application and creates merchant standing data in the system, including bank account details, settlement terms and authorised users. 

Customer payments, refunds and settlement instructions are processed through a cloud-based platform. Most transaction evidence is maintained electronically and transaction logs are retained for six months unless specifically archived. 

During the audit of the financial statements for the year ended 31 December 2025, the following matters came to the auditor’s attention: 

 1. On 20 January 2026, a major merchant entered liquidation. At the reporting date, the merchant owed Times Ltd. a substantial amount arising from refunds processed on its behalf. 

 2. In February 2026, management discovered unauthorised refunds that had been processed before the reporting date through the user account of an employee who had left the company. 

 3. Times Ltd. has experienced persistent operating losses and delayed settlement of amounts due to merchants. Management has prepared cash flow forecasts based on obtaining additional financing from its shareholders. 

 4. Management is reluctant to provide written representations concerning the completeness of merchant liabilities, unauthorised transactions and its plans for obtaining additional financing. 

Required: 
(a) With reference to the cloud-based payment gateway, distinguish between “audit through the computer” and “audit withthecomputer”. 

(b) Explain THREE audit procedures that the auditor could perform using audit software to identify unusual refunds, transactions involving inactive merchants and duplicate settlements.

(c) In relation to the events occurring after the reporting date: 

 (i) Explain TWO financial statement implications of the liquidation of the major merchant and outline ONE audit procedure that should be performed.

(ii) Discuss TWO effects of the unauthorised refunds on the financial statements and outline ONE audit procedure that the auditor should perform. 

(d) Assess TWO matters that the auditor should consider when evaluating the adequacy of management’s going concern assessment and obtaining written representations from management.


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April 2026

 1 Questions
Question 2
​​products across the country. During the audit planning for the year ended 31 December 2025, the audit team noted that the company has placed increased reliance on automated controls and cloud-based documentation. 
 
In response, the audit manager instructed the team to adopt a risk-based audit approach in accordance with International Standard on Auditing (ISA) 315. The team also established that the company uses an integrated test facility within its accounting software as part of its processing controls. Further, because management is under pressure to meet loan covenants set by a local bank, there is concern that revenue may be susceptible to manipulation. 
 
Required: 
(a) With reference to the audit of Afya Supplies Ltd. for the year ended 31 December 2025, describe FOUR procedures the audit team should perform in order to obtain an understanding of the entity and its environment in accordance with ISA 315.  
   
(b) In relation to the computerised accounting environment of Afya Supplies Ltd.: 
 
(i) Explain the term “integrated test facility”. 
 
(ii) Summarise TWO advantages and TWO disadvantages of using integrated test facilities as part of Computer Assisted Audit Techniques (CAATs) in the audit of the company.    
 
(c) Considering the pressure on management of Afya Supplies Ltd. to meet the bank’s loan covenants, discuss THREE indicators of fraudulent financial reporting that the auditor should be alert to during the audit. 


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December 2025

 1 Questions
Question 2a
​​Explain the following terminologies as used in contemporary audit: 
                                                                                                           
(i) Social engineering. 
 
(ii) Embedded audit facilities. 
 
(iii) Integrated test facilities. 


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August 2024

 1 Questions
Question 2a
​​The future of auditing in an evolving landscape is being shaped by emerging technologies and changing business practices. Auditors are therefore expected to understand how technology can better their audit processes. 

 Required: 

 (i) Describe FOUR challenges associated with auditing a computerised information system.

(ii) Explain the concept of “auditing around the computer”. 

(iii) Discuss TWO reasons why auditing around the computer increases audit risk for the auditor.


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April 2024

 1 Questions
Question 2c
​​Explain FIVE challenges that an auditor could face when performing an audit in a computerised information systems environment.


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August 2023

 2 Questions
Question 5b
​​Enumerate SEVEN benefits of data analytics in audit.


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Question 5a
​​Kenneth Muli, an auditor at P and M Associates is in charge of auditing Mali Traders. Kenneth Muli is planning the audit with his team. The team is unsure on whether to use computer assisted audit techniques (CAATs) or manual techniques. 

 Required: 

 Advise Kenneth Muli on FIVE factors to consider when choosing between the two techniques in an audit engagement.


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April 2023

 1 Questions
Question 2a
​​Explain the following terms as used in computerised audit environment: 

(i) Cloud computing. 

(ii) Encryption. 

(iii) Embedded audit module.


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April 2022

 1 Questions
Question 2c
​​Your organisation is in the process of computerising the internal audit function. The management has proposed installation of a Generalised Audit Software (GAS) to replace the manual procedures.

Required:
Evaluate five functionalities that are supported by a Generalised Audit Software


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January 2022

 2 Questions
Question 3
​​When auditing a computer accounting system, the independent auditor should understand how the use of computers affects the various characteristics of internal control. The independent auditor should be aware of those control procedures that are commonly referred to as "general" controls and those that are commonly referred to as "application" controls. General controls relate to all computer activities and application controls relate to specific accounting tasks.

Required:
(a). Describe three general controls that should exist in computer-based accounting systems.

(b). Explain four potential problems of using audit software indicating how each may be resolved.

(c). Explain the concept of "auditing around the computer" and why it increases audit risk.

(d). The directors of XYZ Enterprises Ltd. have prepared a cash flow forecast for submission to the bank. They have asked you as the auditor to provide a negative assurance report on this forecast.

Required:
(i) Discuss two differences between "positive" and "negative" assurance.

(ii) Explain two advantages to the directors of providing a negative assurance report on their cash flow forecast.


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Question 5b
​​With reference to the e-commerce environment, discuss three controls that an entity needs to put in place to safeguard the accuracy, completeness and integrity of financial information.


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December 2021

 1 Questions
Question 1b
​​Examine four matters which an audit practice might consider when deciding whether to use computer audit software.


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November 2020

 1 Questions
Question 3c
​Your audit firm is currently engaged in the audit of Zed Ltd. for the financial year ending 30 November 2020. You are considering whether to perform certain tests manually or with the assistance of computer assisted audit techniques (CAATS). 

Required:

​​Discuss three factors that could influence your decision on whether to perform the tests manually or with CAATs.


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November 2019

 1 Questions
Question 3b
​​In relation to auditing in a computerised environment: 

(i) Explain the term "test data".

(ii) Analyse two uses of test data when auditing a computerised environment.


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November 2018

 1 Questions
Question 5b
​​With respect to information technology (IT) audits, explain the following terms:

(i) Social media risk assessment.

(ii) Software licence review.

(iii) IT governance audit.

(iv) IT risk assessment audit.


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May 2018

 1 Questions
Question 2a
​​You are considering deploying an audit software to undertake substantive testing of data files in the sales and inventory system.

Required:

Discuss five challenges you might encounter while using the audit software.


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November 2017

 1 Questions
Question 3a
​​Explain six benefits an auditor might derive from using computerised audit software.


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November 2016

 1 Questions
Question 3b
​​Discuss five input validity checks you would expect to find in a computerised financial system.


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May 2016

 2 Questions
Question 4b
​​List four audit procedures that could be carried out using computer assisted audit techniques


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Question 4a
​​Describe the following Computer Assisted Audit Techniques (CAATs):

(i) Embedded audit facilities.

(ii) Integrated test facilities. 


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Pilot September 2015

 1 Questions
Question 4c
​​Knowledge of the business is crucial in determining the most effective and efficient audit strategy of an entity using the internet for electronic commerce. Any auditor needs to have an indepth understanding of the related risks and the measures to minimise them. 

Required: 
Discuss the impact of e-commerce on the audit process.


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