Hung Lo Ltd is a wholesaler of furniture (such as chairs, tables and cupboards). Hung Lo buys the furniture from six major manufacturers and sells them to over 600 different customers ranging from large retail chain stores to smaller owner-controlled businesses.  All financial accounts transaction information is stored on Hung Lo’s computer systems. Previous audits have tended to adopt an ‘audit around the computer’ approach.

You are the audit manager in charge of the audit. For the first time at this client, you have decided to use audit software to assist with the audit of the financial systems.
Computer staff at Hung Lo are happy to help the auditor, although they cannot confirm that all the systems documentation is complete. They have warned you that Hung Lo’s accounting software is run using very old operating systems which may not be compatible with more modern programs.
The change in audit approach has been taken mainly to gain a full understanding of Hung Lo’s computer systems prior to new internet modules being added next year. To limit the possibility of damage to Hung Lo’s computer files, copy files will be provided by Hung Lo’s computer staff for the auditor to use with their own audit software.
Following a discussion with the management at Hung Lo Ltd you understand that the internal audit department are prepared to assist with the statutory audit. Specifically, the chief internal auditor is prepared to provide you with some documentation on the computerised wages systems at Hung Lo Ltd. The documentation provides details of the software and shows diagrammatically how transactions are processed through the inventory system. This documentation can be used to significantly decrease the time needed to understand the computer systems and enable audit software to be used on this year’s audit.
Based on the information above explain the problems the auditors face when considering the use of audit software at Hung Lo Ltd. For each problem, explain how it might be resolved.