Term Papers on Auditors

Term Paper Title	Auditors
# of Words	2810
# of Pages (250 words per page double spaced)	11.24

Auditors

     Auditors are responsible to evaluate the security and integrity of computer based systems.  Internal auditors are needed to ensure that there is sufficient control over personnel and departments within an organization.  Such controls are needed in order to maintain data security and data integrity.  Data integrity concerns the accuracy and reliability of data.  Data security concerns the safety of data from unauthorized access.  There are many threats to the accuracy of accounting data.  Some of these threats include errors and irregularities.  Errors are usually unintentional and arise from carelessness and misjudgment.  This can be caused from a breakdown in attention by the employee, lack of training, or lack of knowledge by the employee.  Another threat to the accuracy of accounting data include irregularities.  Unlike errors, irregularities are intentional and include defalcation or management fraud.  Defalcation is the theft of assets from an organization.  This !
causes an overstatement of asset accounts in the financial statements.  An example of defalcation is a theft of cash from an organization by an employee.  Accounting data are also susceptible to management fraud.  A manager may intentionally misstate financial information of a company to make it look more profitable.  By making the company look more profitable this may increase the manager’s bonus or the selling price of the company’s stock.  Internal controls are necessary to help prevent this.  Internal control is a process, implemented by people in the organization, designed to provide reasonable assurance regarding the effectiveness and the efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.  Internal control policies and procedures provide reasonable assurance of preventing or detecting errors and irregularities, however they may fail because of collusion and management override.
     Internal controls that are important when using a computer based accounting system are system controls.  Internal controls can be categorized by their objectives or by scope.  When categorizing system controls by objective there are preventive controls, detective controls, and corrective controls.  Preventive controls are used to prevent errors and irregularities.  Detective controls detect errors and irregularities after they have already occurred.  Once an error is found, management may institute corrective controls.  An example of a corrective control is an adjusting entry made to correct an item found on the trial balance.  System controls can also be categorized by their scope and this is more widely used.  General controls affect all application systems.  These policies, practices, and procedures attempt to prevent errors and irregularities in all accounting application systems.  Application controls affect only specific applications.  Application controls are policies,!
practices, and procedures, that affect only a specific application within an accounting system.  By instituting effective general and application controls, an organization will have better computer security and will be able to identify potential risks and prevent fraud.
     The three main sources of computer security risks include internal sources, external sources, and collusive sources.  Internal sources of risk include operational level employees and managers.  This risk is present due to these employees having custody of the asset or the records concerning the asset.  External sources of risk include business contacts and unknown criminals.  The third type of risk associated with computer security are collusive sources.  There is both internal collusion and external collusion.  Collusion exists when more than one individual joins efforts with another individual(s) to defraud an organization.  These individuals usually conceal the theft by altering the computerized records.  Internal collusion occurs when employees work together to defraud the organization.  Usually an operational level employee steels the asset and the...

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