Internal Auditor- It in Internal Audit

Information Technology (IT) in Internal Auditing

IMPACT OF IT CONTROLS – BENEFITS & RISKS

Operating in an IT environment can present both benefits and risks to the organization.

Benefits

The use of IT helps improve internal controls in several ways. Benefits from the use of IT include the following:

• Computer controls replace manual controls

– Ability to handle tremendous volumes of complex business transactions cost-effectively

– Replacing manual controls with programmed controls can reduce human error.

– Offers greater potential for reducing misstatements because computers process information consistently.

– Online security controls in applications, databases and operating systems also provide opportunities to enhance segregation of duties.

• Higher-quality information is available

– Information produced is more reliable and therefore improves management’s decision making ability.

– More information can be provided faster compared to most manual systems.

• Potential for increased management supervision

– IT can be designed to include a variety of analytical tools for review and exception reporting which could assist management in the supervision of the operations of the organization.

Risks

Although use of IT can reduce many risks in manual systems, in some cases eliminate them, new risks specific to IT systems are created and can affect the organization’s overall control risk. Specific risks to IT systems are discussed below.

• Risks to hardware and data

– Reliance on the functioning capabilities of hardware and software. Without proper physical protection, hardware or software may not function or may function improperly. Therefore, it is critical to physically protect hardware, software and related data from physical damage that might result from inappropriate use, sabotage or environmental damage (such as fire, heat, humidity or water).

– Systematic versus random errors. When organizations replace manual...