Question

Based on an assessment of audit risk, the auditors are concerned with the following two risks:

1. The risk that that the client might be making duplicate payments to vendors.
2. The risk that the client’s accounting clerk might be making unauthorized payments to himself.

Required:

a. Assuming that the client has a manual accounting system, describe how the auditors can design a test to identify the duplicate payments and unauthorized payments.

b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments.

c. Describe the advantages of using data analytics software to identify unusual transactions or entries.

Answer 1

a) Its a inheritance risk which is involving in nature of business, if a client having manual accounting system than We can prevent only by checking all transactions of that particular amount that not be duplicate nor froud payment done by clerk himself.

b) If client having data analysis software than we detect froud mentioned as in question we can detect it by audit checks in particular data analysis software.

c) advantages of using qualitative data analysis software include being freed from manual or clerical tasks, saving times being deal softwarewith large amount of qualitative data having increased flexibility and having improved validity.