Innovation, Inc. is a company specializing in research and development. It accepts short-term research and development projects from other companies and aims to obtain results quickly. It has been very successful at achieving this objective (current sales \(\$ 100\) million).

You are a field auditor in a firm of external auditors that has just taken over the audit of Innovation. Because you have information systems audit expertise, you are assigned to evaluate the reliability of controls over the information systems function. Innovation uses computers extensively to support its activities. It has two large machines for both scientific and commercial activities. In addition, several hundred workstations are dispersed throughout the various departments of the company.

Required.

(a) Your audit manager assigns you to evaluate the quality of information systems planning processes in Innovation as a basis for reaching an understanding of the internal-control structure used by Innovation. Outline the audit procedures you would use to carry out this task.

(b) After completing your audit procedures, assume you find that top management within Innovation undertakes information systems planning on an informal basis only. For example, although they discuss future directions for the information systems function, they do not prepare a formal, documented information systems plan. They argue the costs associated with preparing a formal plan cannot be justified because of the uncertainty surrounding Innovation's activities. What implications does the absence of a plan have for the conduct of the remainder of the audit? How would you now proceed in terms of the audit procedures you recommend the audit team should use to gain an understanding of other elements of the internal-control structure? What are the likely implications for tests of controls and substantive tests that might be conducted during the remainder of the audit?