System Integrity and Validation

System Integrity and Validation
ACC/542
March, 2 2014
Prof: Edgar Coronel

Preface
Kudler Fine Food is a specialty food store that caters their service to a variety of special clients. Providing great service has been a calling card for Kudler Fine Food. Since their first store was open back in 1998, they have enjoyed great success. This has also allowed them to open a few more locations. Having the ability to have a strong accounting information system and great business structure in place was vital to the growth and development of Kudler Find Food. Even though their current system has allowed them to have success, there are improvements that are needed that would allow them to operate effectively. This will lead to a more profitable company. Throughout the process we have developed several recommendations that have been offered to Kudler management staff that would help improve their current systems. Offering the improvement and implementation to Kudler accounts receivable, account payable, inventory system and how payroll is completed is vital to future success. Last week, the team offered suggestions that would improve production, reduce possible threats and increase profits. Along with improving how they process items that have been sold. In addition, the increased accuracy has reduced human error and better consistent communication has all been in relation with the new developed automation systems. Using the flow chart and the ER diagram, we have helped Kudler define their existing database. In addition, using pivot tables has allowed Kudler to move away from using spreadsheet which helped Kudler management make better decisions. When comparing the SAS70 to the SAS94 we learned that the SAS No. 94 was issued to provide guidelines to auditors; SAS No. 94 states that auditing through a computer can only take place “if the processing programs are soundly developed and incorporate adequate edit routines and programmed checks, then errors and irregularities are not likely to slip by undetected. We reviewed both external and internal risk and as Kudler developed their internal control and monitored them consistency, they were able to safeguard assets, ensure reliability, ensure compliance, and have an efficient and effective operation (Internal Controls (2014). Below, the brief will discuss and display how Kudler Fine Food can benefit from using the advancement in technology such audit software and (CAAT’s) or computer assisted auditing techniques. Introduction
To allow themselves to be competitive in the market Kudler Fine Food had to improve and upgrade their system software. With the advancement in technology, more companies have become dependent upon computers to be the foundation of the business. Management must understand that all accounting information from computers must be valid, reliable, and most importantly accurate. The main objective of this brief is to discuss how CAAT can validate data and provide explanations to how it works. Finally, how this software can benefit and be used in Kudler AIS system. Validate Data and System Integrity
The computer assist auditing techniques can help Kudler improve the effectiveness of an audit. The CAAT’s allows accountants and auditors to run tests and monitor financial data through automation. When using the software, auditors will see an increase in accuracy and production. The auditors will run tests to check if the data is valid by using test data. Test data is a set of fake tests that the auditors run through the application and compare the results with what he or she expects (Hunton 2004). The objective of the test is to determine if the technique check data validation controls and error detection and arithmetic calculation. The test is also done to verify the integrity of the data. Usually auditors would use a CAAT called extract and analyze where they would take samples of data and test them. But now more auditors are using computers which allows them to test 100% of data. For example, if an auditor was auditing Kudler payroll the auditors can look over the payroll and look for discrepancies that may be discovered. Data query is a CAAT that can detect fraud. A data query is a search to determine if the results fit within the context of evidence of the audits. The test includes tests of controls, substantive testing, and interviews with client personnel, risk assessment performed during audit planning, and the environment in which the business operates. The auditor should consider, for example: ■ Does the evidence make sense when other relevant trends are considered? ■ Does the evidence support assertions made by management or employees? ■ Does the CAAT pertain to an area identified as high risk? Functions of Audit Productivity Software
If an auditor uses audit production software, they should notice and increase in effectiveness and productivity. Automation of data can save an auditor time and effort. Also, the CAAT can mismatch items and regulatory issues. Another advantage an auditor gains are electronic working papers, groupware, time and billing, reference libraries and document management. Electronic paper increases productivity because the auditor no longer is spending time on manually auditing work papers (Hunton 2004). Groupware allows sharing of information across firms and between the auditor and the clients (Hunton 2004). Time and billing software can ease the formerly erroneous process of accounting for chargeable hours and compiling and preparing bills accordingly (Hunton 2004). Reference libraries have two main reasons: to locate company-specific policies and procedures, and to search for authority when researching a particularly thorny problem (Hunton 2004). Document management software that has made online document storage readily available and practical has greatly enhanced the auditor’s productivity (Hunton 2004). Audit Productivity Software
Kudler could use audit productivity software to assist with auditing their AR, AP, inventory and payroll. Kudler management should keep and update records of all policies and procedures. Having the ability to access groupware software employees can share information and best practices when preparing for an audit. Kudler could use document management to have online access to documents which should increase productivity. Finally time and billing can save money by automatically updating billing information. Conclusion
One of the most important aspects is system integrity and providing valid data. If Kudler uses both productivity software and CAAT, it can be within their reach. For Kudler’s continued success it would be in their best interest to take advantage of these options.

References
Hunton, J. E., Bryant, S. M., & Bagranoff, N. A. (2004). Core concepts of information technology auditing. Hoboken, NJ: Wiley.

Internal Controls (2014). Retrieved from https://f2.washington.edu/fm/fa/internal-controls

References: Hunton, J. E., Bryant, S. M., & Bagranoff, N. A. (2004). Core concepts of information technology auditing. Hoboken, NJ: Wiley. Internal Controls (2014). Retrieved from https://f2.washington.edu/fm/fa/internal-controls