Question

Q No.7:A CIA’s client, The Outsider, Inc., is a medium-sized manufacturer of products for the leisure time activities market (camping equipment, scuba gear, bows and arrows, and so on). During the past year, a computer system was installed, and inventory records of finished goods and parts were converted to a computer processing. The inventory master life is maintained on a disk. Each recorded of the file contains the following information:

Item or part number

Description

Size

Unit of measure code

Quantity on hand

Cost per unit

Total value of inventory on hand at cost

Date of last sale or usage

Quantity sold or used this year

Economic order quantity

Code number of major vendor

Code number of secondary vendor

   In preparation for year-end inventory, the client has two identical sets of preprinted inventory count cards. One set is for the client’s inventory counts and the other is for the CIA’s use to make audit test counts. The following information has been keypunched into the cards and interpreted on their face:

Item or part number

Description

Size

Unit of measure code

In taking the year-end inventory, the client’s personnel will write the actual counted quantity on the face of each card. When all counts are complete, the counted quantity will be keypunched into the cards. The cards will be processed against the disk file, and quantity-on-hand figures will be adjusted to reflect the actual count. A computer listing will be prepared to show any missing inventory count cards and all quantity adjustments of more than $100 in value. These items will be investigation by client personnel, and all required adjustments will be made. When adjustments have been completed, the final year-end balances will be computed and posted to the general ledger.

                The CIA has available generalized audit software that can process both cards and disk files.

Required:

a.            In general and without regard to the facts above, discuss the nature of generalized audit software and list the various types of uses of such software.

b.            List and describe at least five ways generalized audit software can be used to assist in the audit of inventory of The Outsider, Inc. (For example, the software can be used to read the disk inventory master file and list items of high unit cost or total value. Such item can be included in the CIA’s test counts to increase the dollar coverage of the audit.)

Requirments of generalized audit software please

Answer 1

a. Generalized audit softwares are computerized audit tools utilized by auditors to perfom audit procedures such as selecting a sample, sorting and summarizing data, on a variety of file formats of client data and provide requisite output through the use of computer technology.

Generalized audit softwares are generally used to perform substantive audit procedures as they can be easily used to scan, test and summarize a large voulme of data, with accuracy, Generalized audit softwares can be used for following purposes:

• To select audit samples.
• To sort and summarize data.
• To Compare data collected by auditors with client data records.
• To verify the correctness of calculations and computations.
• Report the data in auditor-specified formats.

b) Ways in which Generalized audit softwares can be used to assist in audit of inventory of the Outsider, Inc:

• Compare the inventory master file (on disk) with the CIA's preprinted count cards to verify that the count cards are complete and accurate.
• Select high value inventory from master file for test counting by the auditor and select samples (excluding the ones to be test-counted) for performing other substantive procedures.
• Perform aeging analysis of the inventory's age from the inventory master file, This can help the auditor to identify items which could be obsolete and need to be written off.
• Compare the quantity on hand of various items of inventory with the economic order quantity, which may help in identifying slow-moving goods or overstocking.
• Enter the audit test-count quantities onto the cards. Matchthese cards against the client’s adjusted disk inventorymaster file, comparing the quantities on the cards to thequantities on the disk file and list any differences. This willindicate whether the client’s year-end inventory counts andthe master file are substantially in agreement.