Assume that you are an audit senior in charge of planning the audit of an entity that your firm has audited for the previous four years. During the audit planning meeting with the manager and partner in charge of the engagement, the partner noted that the entity recently adopted an IT- based accounting system to replace its manual system. The manager and partner have limited experience with IT- based accounting systems and are relying on you to help them understand the audit implications of the entity’s change. Consequently, they have asked you to respond to a few concerns regarding automated accounting systems.

Required:
a. In previous years, the audit firm has relied heavily on substantive procedures as a source of audit evidence for this entity. Given that the entity now has changed its accounting system, what are some of the factors that you should consider when deciding whether to move to a reliance strategy?
b. Under what conditions should the audit firm consider engaging an IT specialist to assist in the evaluation? If the firm hires an IT specialist, what information should the auditors ask the specialist to provide?
c. How are the five components of the entity’s internal control affected by the entity’s change to an IT- based accounting system?