Para 3.22.52 — MSO (Audit)
Original Rule Text
3.22.52 Before attempting an evaluation of application controls, it will be necessary for an auditor to secure a reasonable understanding of the system. For this purpose, a brief description of the application should be prepared indicating
(i) the major transactions;
(ii) the transaction flow and main output;
(iii) the major files maintained; and
(iv) approximate figures for transaction volumes.
What This Means
Before evaluating application controls, the auditor must first understand the system by preparing a brief description of the application. This description should cover the major types of transactions the application handles, how transactions flow through the system and what outputs are produced, the major data files the system maintains, and the approximate volume of transactions processed.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Auditors must understand the application system before evaluating its controls
- 2A brief description of the application must be prepared covering four key areas
- 3Major transactions and their flow through the system must be identified
- 4Major files maintained by the system must be documented
- 5Approximate transaction volumes must be noted to assess risk and testing scope
Practical Example
Before auditing a computerised stores accounting system, the auditor prepares a description noting that the system handles three major transaction types: goods receipts, issue notes, and returns. The flow is: receipt vouchers are entered → stock ledger is updated → issue notes deduct from stock → monthly reports are generated. Major files include the item master, stock balance file, supplier master, and transaction log. Approximately 500 receipt vouchers and 1,200 issue notes are processed monthly. With this understanding, the auditor can now meaningfully evaluate the input, processing, and output controls.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Why must auditors understand the system before evaluating controls?▼
Why is transaction volume important to know?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.