Question

Ella Hsu, CPA, has recently opened her own firm after working for FiFi & QQ CPAs, for 20 years. Ella’s firm is specialized in computer system audit, and she hired 10 well-trained computer specialists. Recently, Ella accepted a new engagement. She has confidence in retaining this engagement for a long period of time. Since this new client is a major company in the PC industry, the client expects Ella to apply advanced audit technology. As a result, Ella and the client have obtained a mutual understanding that the cost of an effective audit of information systems can be high.

Last year, the client has just developed and installed an order entry system that is accessible by terminals from multiple sales offices in U.S. This system provides on-line responses to sales personnel inquiries regarding the quantity on hand of PCs in inventory. In addition to the inquiries, sales orders entered by sales personnel update the inventory file immediately.

After assessed the client’s control systems, Ella is concerned about the new order system.   Specifically, she obtained evidence of falsified orders were created in branch offices.

What additional information, discuss THREE pieces of information, does FiFi need in order to make a final decision?

Answer 1

To take a final decision on the matter, there are certain informations needed -

• If Ella thinks that false orders are being created, then she should demand the proof of orders being taken at every branch and then should match the exact figures of orders made with what has been reported in the system. This is the most important information needed for taking decisions.

• It should be analysed that problems are arising from which specific branches. After knowing this, it could be easy to investigate into the matters regarding the concerned problem.

• It is also very important to have the information regarding, is the problem caused because of some technical faults or there are humans interventions after this. And accordingly the decisions should be taken to eradicate the problem. The technical issue needed to be found which is causing this error.

These are the three informations needed to make final decisions.