Jabiru Inc.’s senior management recently obtained a new decision-support database system that allows the managers to generate standard reports and also customize enquiries that use data from all functional areas of their company. Before this system was in place, reports to senior managers were generated manually by the operations managers in the various departments, such as purchasing, marketing, inventory control, production, human resources, and administration. The senior managers are much happier with the new system because now they can generate reports as soon as the period ends; they can draw the data directly from the company’s computer databases; they can control the content and format of the reports; and the operating managers have less opportunity to manipulate the information in the reports. For example, in the first two months of the new system, senior managers were able to identify a discrepancy in the production department that was resulting in significant shrinkage and were able to correct the control weakness quickly. The previous report, which had been designed and produced by the production manager, did not include the data needed to identify the shrinkage problem.
Discuss how the new decision-support database system affects Jabiru’s internal control and its risk of material misstatement.
Comment on the potential audit planning implications of the new decision-support database system.