Question

What role does the Accounting Information System play in the production cycle by taking a Company as sample study?

Answer 1

In a production cycle it is not possible to auditor to check and verify all items related to production. So auditor requires to do his audit work based on sample techniques. In sampling techniques, auditor not checks and verifies all items of financial statements. Auditor performs his procedure on selected items of production cycle.

In this sampling techniques, Accounting Information System play major role during production cycle. By Accounting Information System, auditor use in following manner:-

•            Through Accounting Information System auditor can determine input output ratio of material to finish goods and can check on selected samples whether organization getting correct output as per input raw material.

•            Auditor can use audit trail in accounting information system to know complete accounting procedure and also trace the sample financial date from general ledger to the source documents like invoice, receipt, voucher etc.

•            Auditor can also check mathematical accuracy of selected financial transaction sample through Accounting Information system.

•            Auditor can use analytical review audit procedure like ratio analysis, trend analysis etc on selected audit sample items.