Autotool Ltd. is a medium-size company that designs and manufactures a range of industrial robots. The company was started 11 years ago by two young entrepreneurial engineers. One had a background in computer engineering. She had a flair for research and design work. The other had a background in mechanical engineering. She had a flair for recognizing the best research ideas in her field and implementing them in practice. Under their guidance, the company obtained a reputation as a high-quality, reliable supplier of industrial robots. It grew steadily, and after its first decade of operations it was in a sound financial position.

A year ago, however, both engineers sold their shares in the company at a substantial profit to a larger competitor. They had decided to start another business that specialized in a niche market for a particular type of industrial robot.

When the new management took over Autotool, they went to tender for audit services. Your audit firm won the tender. You and your colleagues are currently undertaking your first audit of the new client. Because you are the senior information systems auditor within your firm, you are responsible for assessing controls over the information systems function. You are currently undertaking audit activities as a basis for obtaining an understanding of Autotool's internal-control structure.

In the course of your review of top-management controls, you note that high staff turnover has occurred ( 25 percent) in the previous 12 months. In addition, two Vice Presidents of Information Systems have come and gone over this same period. The current Vice President of Information Systems was appointed only two months ago. He was hired to the position after spending 25 years as the information systems manager of a small retailing company.

When you review staff records, you notice that the current staffing situation differs markedly from the situation that existed during the first ten years. Turnover was low during this period (3 percent), and the same person had been in charge of information systems throughout the entire time. He had left suddenly shortly after the new management took over.

When you conduct interviews with information systems staff, you detect that many appear to have a low commitment to the company. Many seem to be working long hours on a large number of different projects. They seem preoccupied and distracted. Some also appear uncertain about what manage-

ment and users want in the systems they are designing and implementing. During an interview with a woman who has been there for many years, she comments obliquely that "things aren't what they used to be." She withdraws, however, when you ask her to explain what she means.

You are concerned that your findings could have implications for the conduct of the remainder of the audit. You note, however, that all of Autotool's financial systems are based on software packages that have been purchased from reputable, outside vendors. Internal software development work focuses primarily on engineering applications to support research and the design, implementation, and operation of robots.

Required. Write a brief report outlining what you believe to be the implications of your findings. How will you now proceed with the rest of your examination of the reliability of controls over the information systems function