1.0 CHAPTER ONE
1.1 Introduction to Auditing and Computer
1.2 Background of study
1.3 Brief history of study
1.4 Purpose of study
1.5 Significance of study
1.6 Statement of problem
1.7 Scope and Limitation
1.8 Definition of Technical terms.
2.0 CHAPTER TWO
2.1 Definition of Auditing and Computer
2.2 Electronic Data Processing and the Auditor
2.3 Various Methods of Data Processing
2.4 Internal Control in EDP System
2.5 Auditing in a Computer Environment
2.6 Audit of Small Business with Computerized
2.7 Computer and the Society
2.8 Information and the Society
2.9 Organization of the Computer Department
2.10 Financial and Economic Aspect of Computer
3.0 CHAPTER THREE
3.1 Research Methodology
3.2 Data Collection Method
3.3 Description of Research instrument
3.4 Sampling Plan
3.5 Conduct of Work
4.0 CHAPTER FOUR
4.1 Data Analysis and Interpretation
4.2 Result Findings Presentation
5.0 CHAPTER FIVE
5.1 Summary of Findings, Conclusion and
5.2 Summary of Research Findings
chapter attempts to explain why Auditing exist as a discipline. It first
explain the concept of stewardship
accounting. The objectives of auditing are best explained with an introduction
to auditors report and the organization of the Auditing profession.
different types of audits are introduced in the final part of this chapter.
Stewardship Accounting according to Kola
Olowookere are accounts rendered by managers to owners of the business.
Stewardship account led to the development of auditing. This reporting and
accounting is usually done by means of financial statement. Examples are:-
balance sheet, profit and loss account and cash flow statement .
Auditing can be defined from two
different perspectives:- One, auditing as a tool put in place by the management
of the company to clock the internal control system operation if they are
strictly adhered to.
In other words, Auditing according to
The Consultative Council of the Accountancy Bodies defines Audit as the
independent examination of an expression of opinion on the financial statements
of an enterprise by an appointed auditor in pursuance of that appointment and
in compliance with any relevant statutory obligation.
to the Consultative Committee of Accounting Bodies (CCAB) in the United Kingdom
in its auditing standard of April 1980 stated among other things:-
auditor should obtain relevant and reliable audit evidence, sufficient to
enable him draw reasonable conclusions”.
evidence is information obtained and recorded by the Auditor in arriving at the
conclusions on which he bases his opinion on the financial statements.
OBJECTIVES OF AUDITING
primary object of an audit is not to detect fraud, errors and irregularities.
The primary duty is to produce a report by the auditor of his opinion of the
truth and fairness of financial statements so that any person reading and using
them can rely in them. However, the secondary object is to:
detect errors and fraud
prevent errors and fraud
provide moral check
show true and fair view of his opinion
ensure the reliability of the internal control system
Hypotheses formulated for this study
“The impact of computer in auditing” a case study of Tantalizer Fast Food
Ikotun will include the following:
H1 Computerization has enabled employees carry
out their task and responsibilities effectively, efficiently and quickly meet
the management demand.
Ho Computerization has not enabled
effectiveness and efficiency in management.
H1 Computer has a positive effect in
accounting system in relation to the productivity of accounting personnel
Ho Computer does not have a positive effect in
accounting system in relation to the productivity of accounting personnel
H1 Computer has created employment opportunity
of accounting personnel.
Ho Computer has only led to unemployment of
OF OBTAINING AUDIT EVIDENCE
According to Kola Olowookere, the five
methods of obtaining audit evidence are:-
(a) Inspection: It involves reviewing documents or
examining records, documents or tangible assets. Inspection of tangible assets
provides the auditor evidences as to their existence but not necessary as to
their ownership, cost or value.
(b) Observation: Observation involves looking at an operation
or a procedure being performed by others so as to determine the manner of its
performance. Observation provides reliable evidence to the manner of the
performance at the time of the observation but not at any other time.
(c) Enquiry: This involves seeking relevant information
from knowledgeable persons inside and outside the organization (management,
staff, solicitor, bankers, parent company, valuers) formally or informally,
orally or in writing. The degree of reliability that the auditor attaches to
evidence obtained in this manner is dependent on his opinion as to the competence,
experience, independence and integrity of the respondent.
(d) Computation: Checking the accuracy of accounting records
or performing independent calculations. The reliability depends somewhat on the
accuracy of the underlying records.
(e) Analytical Review: It involves studying significant ratios,
trends and other statistics and investigating any unusual or unexpected
variations. Analytical review proves confirmation evidence for the audit
(a) Statutory Audits: A statutory audit is an audit carried out
by an independent auditor. This independent auditor is one who is not in the
employment of the organization in whatever manner he considered and in
accordance with the enabling statute. No restriction whatsoever may be put upon
the auditor in the discharge of his statutory duties.
(b) Private Audit/ Non- Statutory: The private audit is an independent audit,
it is conducted because the owners desire it, not because the law requires it.
Examples are audits of the account of sole trader, partnership, sole
(c) Interim Audit: This is an audit which is completed to a
particular date within the accounting period for example a quarter or a half-
year. The interim audit is usually followed at accounting period end by the
(d) Internal Audit: An internal audit is one conducted by an
employee of a business into any aspect of its affairs. It is also an appraisal
of policies, pans, procedures, activities and records of the organization by
specially assigned staff. It ensures that the organizations internal control
system is operating satisfactorily.
(e) Final Audit: Final Audit is a process that is carried
through to completion in one continuous session. Although it may be commenced
before the end of the end of the accountingperiod, it is completed at least
after the end of the accounting period.
is defined as a device capable of accepting data in the form of facts and
figures, applying prescribed processes to the data and supply the result of
these processes as meaningful information.
ANALOG (ANALOGUE) COMPUTER
are computers that vary continuously such as variations in temperature, speed,
chemical composition of petroleum products or the amount of current flowing through
electrical conductor. They are used for a wide variety of industrial and
scientific applications that require the processing of continuous data.
type of computers counts discrete numbers and figures. They process discrete
data information and operate on variable whose magnitude are limited or
restricted to certain specific limits e.g. the number of people in a family.
They are used for accounting, forecasting, e.t.c. Examples are micro computers,
mini computers, mainframe computers e.t.c.
combines of the features of both digital and analog. They are used in specialized
applications where both kinds of information need to be processed in a single
system. They are found in scientific and technical application.
Digital computer is an electronic device that performs high speed
or logical calculations, assemblies, store, correlates processes and print
information derived from coded data in accordance with a pre- determined programme.
A digital computer consist of a Central Processing Unit (CPU) to which wires
and peripheral devices (input unit, output and backing storage devices) are
attached. The CPU consist of three main parts:-
control all the operations of machine and guides the execution of the
instructioncontained in the programme. The unit contains function decoder,
address, encoder, register, timing pulse generator, Programme
instruction,control and instruction counter.
LOGICAL UNIT (ALU)
unit does the arithmetic and logical operations of the instructions. It
contains the accumulator register and function circuits on arithmetic,
discrimination and data transfer.
IMMEDIATE ACCESS STORE (AIS) UNITS
hold the programme which is being executed together with the data on which the
programme is currently working. The unit through the input buffer, output
buffer, working store and program store.
OF DIGITAL COMPUTER
There are two types of digital
Certain computers are designed for a
particular singular operation. E.g. Telecommunication system.
This digital computer is viewed as a set
of machines carefully connected to Perform the data processing functions. E.g.
Micro Computers, Mainframe Computers.
PURPOSE OF STUDY
justifies why the study should be undertaken and also the main purpose of the
research study. The research is out to examine a recommend solution if need be
to the problems below.
The above justifies why the study should
be undertaken and also the main purpose of the research study. The research is
examine the problems encountered in the process of changing from manual
accounting to electronic data processing system.
investigate the problems encountered in the process of using computer in the
(c) To show the relevance of computerized
difference in terms of efficiency between the manual and the computerized
The study is not only meant for the
successful completion of the National Diploma in Accounting Programme but also
to familiarize accountant with the uses and operation of computer in an
The research is also important because
it examines how accountants/ auditors are taking the challenges by the use of
computers. It will as well examine the relevance of computer to accountants,
the basis for determining whether to change from manual to computerized system.
The efficiency of computer system as compared with manual system and the
problems of the computerized accounting/ Auditing systems.
The project will also help readers of
this project to have a useful idea of computerized and auditing system and
recommend the area for further research in the field of computer as related to
auditing and accounting.
of the historical feature of most organization in Nigeria is manual operations,
its limitations call for need to look into a more realistic approach that is
workable, reliable and efficient computerization. The research intends to
auditing firm either public or private establishment that have gone
computerized and have problems of handling of records, inadequacy and delay in
getting information so as to know the extent of their problems.
research has been narrowed down to computerization of accounting system of the
Tantalizer Fast Food Plc, Ikotun only as a case study because of time
constraint. The area of computerization of accounting system is very wide but
is limited to electronic data proceeding system and other area computerized
accounting system, which shall not be dealt with.
responses of official of the fast food chosen as a case study have not been
encouraging. There is also delay in getting information from the company.
problem of changing from manual to computer is very rigorous and expensive.
the advantages of computerization, it still has some problems like:
of rudimentary knowledge and basic skill required in handling computers delays
of procurement and cost of training constitute another problem.
acts are so diverse that adapting computer to all these complexities may prove
a newly established financial institution, computerization is a luxury which
may not be seen as necessary.
research has been narrowed down to computerization of accounting system of the
Tantalizer Fast Food, Ikotun as a case study because of the time constraint.
should be borne in mind that area is very wide but the research is limited to
electronic data processing system and financial accounting processing.
responses of the official of the establishment chosen as a case study have not
COMPUTER IN OPERATION
The purpose of every organization is to
provide goods and services. To achieve these defined purposes involves making
effective discussions. Decision that anticipate problems and opportunities such
decisions are made possible through information that is timely, accurate and
relevant to the specific task.
There is an ever growing awareness of
the need for business men and Accountants to have a good knowledge of data
processing techniques. This is evidenced by the fact that more and more
institutions and professional bodies are including data processing as a subject
in their syllabus. It is the purpose of the information system to supply these
The term, information system , covers
the whole scheme of data collection, organization, processing and presentation
most often, closely associated with the computer. The information system covers
all the uses of processing of information within an organization.
Data corresponds to discrete facts
phenomena from which one gains information about the real world.
Data can be defined as the aid fact
about the activities of a business which may be represented in the form of
numbers and alphabetic characters or symbols e.g. hours worked by an employee,
quantity of materials used from store e.t.c.
This is data which has been processed
through system. It is the relevant knowledge produced from data processing
system for specific purpose.
An information system is a set of interconnected
procedures, the purpose of which is to provide managers at all levels and in
all functions of an organization with the information necessary to enable them
to make timely and effective planning.
Co-ordination, controlling and
discussing information is an economic commodity thatmust be sold, bought,
stored, exchanged and consumed by any person that aims beyond mere existence.
This is the term given to the process of
collecting all terms of source data together and converting them into
Data processing operations are concerned
in the followings:
good information must be relevant, complete, accurate, timely and must have a good
presentation for easy assimilation . Information system has its formal and informal
formal element information is processed in a routine basis. The computer consists
of two interrelated domain namely: The Hardware and Software. The Hardware is
the machine itself and attached peripherals. While the software is the set of
sequenced instruction that drive the hardware. Computers are classified broadly
into three categories namely: Micro Computer and Mainframe Computer.
mainframe computer is a big machine with a lot of composes peripherals with high
processing speeds, which have a substantial effect on the machine cost. The maincomputer
is between the extremes of mainframe and micro computer. Ithas more capacity
that the micro but has less capacity that the mainframe.
OF MICRO COMPUTER
Today, micro computer has been widely
accepted due to the following:
specialized training required.
special room conditioning.
How or when is computerization done?
Computerization is done when:
is large volume of data to be processed using predefined procedure.
are: Payroll, billing, and store
are many and procedural
special is critical
of report is not negotiable.
SCHEMATIC VIEW OF COMPUTER
DEFINITION OF TECHNICAL TERMS
is an electronic gadget that performs high speed logical or mathematical
calculations derived from coded data.
is a raw figure obtained from day to day activities. They do not enable
decisions of any consequences to be made but enter into actual running of the
is the data which has been processed through the system.
set of computer program applied to specific tasks e.g. sales or wages.
for copying and storage of data, programs and files so that recovery can be
made from loss of data from system malfunction or sabotage.
very common high level language used in micro system
simple control whereby every number has an extra digit added which is calculated
by a formula if the number (e.g. a product code) is wrongly entered than the
check digit will not agree.
ASSISTED AUDITING TECHNIQUE (CAATS)
written computer programs, or other techniques such as test packs, where an
auditor uses the computer to assist him in evidence gathering activities.
9. COMPUTER AUDIT PROGRAM
A program which will examine the contents of a
client’s computed files or perform operations(e.g. totaling or calculating) on
clients computer files.
device looking like a gramophone record which is used to store data in a
magnetic form.Disc can be hard (and expensive) or floppy (and cheap). They are
used with a disc drive.
copying of computer held files onto separate magnetic media or on to print out.
The objective is to aid the recovery of data lost due to error.
12. FLOPPY DISC:
Small flexible magnetic disc for
storage of data and files.
13. BATCH PROCESSING:
system processing where similar data are grouped together and processed at one
go. For example, all the weeks invoices might be processed on Friday afternoon.
Central Processing Unit
This physical equipment both
mechanical and electronic.
typewriter like device which data can be entered into the computer or
coded system by a programmer which can be translated into series of operations
by the computer. Well known languages such as: COBOL, ALAOL, FORTRAN BASIC etc.
18. MAINFRAME COMPUTERS:
computers with many connections e.g. numerous terminal, hard disc drives,
printers etc. often they require special environments such as air-
conditioning, temperature control etc.
19. MASTER FILES:
of data which change with time. They are updated e.g. sales ledger, balances,
stock balances, price lists etc.
of processing, offered to a user on the monitor.
21. MICRO COMPUTER:
A small cheap computer.
They are so powerful and are used for many applications.
A system of processing
whereby each transaction can be input when it occurs compared with batch
A set of instructions
which a computer can follow to carry out processing. Programs can be written in
machine code or in high level languages.
A subdivision of a
file. For example, a sale ledger file consists of a set of customer’s account.
25. RUN TO RUN CONTROLS:
A control whereby data
(e.g. a reart or harsh total) is calculated for a file and checked again by the
computer each time a file is processed.
27. SYSTEMS ANALYSIS:
art, science or professionof investigating analysis, designing and
implementation of computer systems.
devices for computer data or files.
29. OPERATING SYSTEM:
The permanently held
program which controls the use of application program and provide standardized
facilities to the facility.
30. VISUAL DISPLAY UNIT:
A device similar to a
TV screen on which information on a computer file can be displayed.