Para 3.20.2 — MSO (Audit)
Original Rule Text
3.20.2 The concept of Systems Audit is that if an in-depth analysis of the mechanics of a system reveals that it is designed with appropriate controls, checks and balances to safeguard against errors, frauds, etc., Audit can reasonably assume, without the necessity of undertaking a detailed examination of the individual events or transactions, that the results produced by the system would be fairly accurate. Evaluation of the efficiency and effectiveness of any system will, however, require sample testing of its actual working. Systems Audit thus serves also as an effective aid to management.
- General principles
What This Means
Systems Audit is based on the idea that if a detailed analysis of a system shows it has proper controls, checks, and safeguards against errors and fraud, then the auditor can reasonably trust the outputs without examining every individual transaction. However, to evaluate efficiency and effectiveness, the auditor must still do sample testing of how the system actually works in practice. Systems Audit also serves as a useful management tool by identifying control weaknesses.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1If a system has adequate controls and checks, individual transactions need not all be examined
- 2The focus is on evaluating the design and adequacy of the system itself
- 3Sample testing of actual operations is still required to assess efficiency and effectiveness
- 4Systems Audit benefits management by identifying areas for improvement
Practical Example
An auditor examines the procurement system of a PSU and finds it has multi-level approvals, segregation of duties between ordering and receiving, competitive bidding requirements, and digital audit trails. Since the system design is robust, the auditor does not need to check every purchase order individually but conducts sample tests on 50 transactions to confirm the controls are working as designed.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Does Systems Audit replace transaction-level audit?▼
How does Systems Audit help management?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.