Refer to Chapter 11 and review Figures 11.1 through 11.3. Then review Figure 12.6 in this chapter.

Figure 12.6

a. The auditor decided to use the following audit strategies.

(1) A lower control risk approach for the batch processing system in Figure 11.1.

(2) A lower control risk approach for the online system in Figure 11.2.

(3) A primarily substantive approach for the microcomputer system in Figure 11.3.

Give reasons why the auditor probably used each of these audit strategies.

b. The auditor assessed control risk at a lower level for the batch processing system in (1) than for the online system in (2). Give reasons why.

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Misstatements That Could Occur 1. Unauthorized changes could be made to the programs by the com- puter operator. 2. Unauthorized pro- grams could be run. 3. Unauthorized changes could be made to mas- ter files. 4. Computer programs could contain errors that cause data to be improperly processed. 5. Input data could be lost or altered during processing. 6. Data could contain blank fields, illogical conditions, out-of-limit amounts, etc. 7. Computer output may not be consistent with data input from termi- nals. Batch Processing System Internal Control Policies and Procedures Programmer and com- puter operator are sepa- rate. There are program list- ings and logs. Only users have access to master files. An independent group tests all programs on a periodic basis. Batch totals are used. Data are subjected to com- puter edit program be- fore file updating. Control totals are recon- ciled with input. Online System Users enter data, but other functions are sep- arate. There are program list- ings and logs. Only users have access to master files. Internal auditors test all programs. Record counts are made. Computer edit program checks data. Control totals are recon- ciled with input. Microcomputer System Commercial software pack- age is used by book- keeper. There are no program list- ings or logs. Bookkeeper has access to all files. Commercial software is used. No batch totals are used. Limited edit program is used. No control totals are gen- erated. Overall control risk as- Less than maximum Less than maximum Maximum sessment