AuditingArticle-BriefsAll Briefs are Individual Assignments.docx

Auditing
Article-Briefs
All Briefs are Individual Assignments
Briefs are one (1) page write-ups of selected articles requiring
you to (1) summarize the article with the central message and
the author’s theme; (2) discuss 2 reasons why this is an
important or unimportant topic for the audit profession; and (3)
indicate your agreement or disagreement with 3 of the author’s
conclusions or opinions and support your 3 points with different
auditing standards (PCAOB, ASB, IAASB, ACFE, IIA etc.). Do
not agree or disagree with the standards but agree or disagree
with the author. You may NOT use your textbook as an
authoritative source but your textbook may guide you to the
right source.
The paper specifications are:
1. one page
2. one side
3. standard-sized paper (8 ½ inches by 11 inches)
4. double-spaced
5. one-inch for all margins
6. font-Times New Roman
7. font size > or = 11
We will discuss the articles on the days the briefs are due.
Please submit briefs at the beginning of class. Bring a second
copy or your notes to refer to when the article is discussed.
Briefs are due according to the schedule. Late submissions will
not be accepted. You may email the brief if you will not be in
class.

The Rubric is an integral part of understanding the assignment.
Please see the Rubric for specific information about how the
assignment will be graded.
Health Services Strategic Marketing
HSA505
Philip Kotler’s Marketing Plan
Welcome to Health Services Strategic Marketing.
In this lesson we will discuss Philip Kotler’s Marketing Plan.
Next slide.
1
Topics
Developing Marketing Plans
The following topics will be covered in this lesson:
Developing Marketing Plans; and
Next slide.

2
Develop Comprehensive Marketing Plan
Road Map
Significant Effort and Attention
Given the scope and diversity of marketing activities, it is
essential for marketers to formalize their pursuits on at least an
annual basis through the development of comprehensive
marketing plans. By putting marketing plans in writing,
marketers are forced to think through upcoming periods,
perform routine marketing analyses, and set marketing goals
and objectives that are properly aligned with institutional goals
and objectives.
When completed, marketing plans act as road maps, allowing
marketers to assess their progress over time, making
adjustments as necessary. Without formal marketing plans,
marketers will likely find themselves management marketing
activities in a reactive fashion, lacking insight, direction, and
control—a formula for disaster.
Developing marketing plans requires significant effort and
attention. Among other things, these plans required accurate
product, market, and competitor information and assessment, as
well as insightful and creative market.
Next slide.
3
Eight Sections Marketing Plan

Contain Necessary Plan Components
Although there are no mandatory guidelines for the format of
marketing plans, there is a useful outline for such plans
developed by Philip Kotler. Kotler’s Marketing Plan consists of
eight sections:
One. Executive Summary & Table of Contents;
Two. Current Marketing Situation;
Three. Opportunity and Issue Analysis;
Four. Objectives;
Five. Marketing Strategy;
Six. Action Strategy;
Seven. Financial Projections; and
Eight. Implementation Controls.
Given the importance of marketing plans, marketers must take
great care in preparation of these documents. Kotler’s
Marketing Plan provides marketers with a useful framework for
presenting these documents in an orderly fashion. By using
Kotler’s framework, marketers are assured that their marketing
plans contain necessary plan components and that these
elements are presented appropriately. When content is added to
this framework, marketers gain an invaluable marketing
resource.
Next slide.
4
Check Your Understanding

Summary
We have reached the end of this lesson. Let’s take a look at
what we’ve covered.
During this lesson we gave reasons as to why developing
marketing plans is important.
It is essential for marketers to formalize their pursuits on at
least an annual basis through the development of comprehensive
marketing plans. By putting marketing plans in writing,
marketers are forced to think through upcoming periods,
perform routine marketing analyses, and set marketing goals
and objectives that are properly aligned with institutional goals
and objectives.
Finally, we reviewed Philip Kotler’s Marketing Plan, which is a
useful framework for presenting these documents in an orderly
fashion.
This completes this lesson.
6
PROPERTIES
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HSA505
Ries & Trout’s Marketing Warfare Strategies
In this lesson we will discuss Ries & Trout’s Marketing Warfare
Strategies.
Next slide.
1
Topics
Ries and Trout’s marketing warfare strategies:
Defensive Warfare
Offensive Warfare
Flanking Warfare
Guerrilla Warfare
Ries and Trout’s marketing warfare strategies, more
specifically:

Defensive Warfare,
Offensive Warfare,
Flanking Warfare; and
Guerrilla Warfare.
Next slide.
2
Ries and Trout’s Marketing Warfare Strategies
Defensive Warfare
Offensive Warfare
Flanking Warfare
Guerrilla Warfare
Hospitals, medical clinics, and other healthcare entities must
attract and retain customers to achieve growth and prosperity.
Success at attracting and retaining customers ultimately
determines the share of the market—the market share—held by
entities.
One of the most significant obstacles to gaining market share is
that of competition. Healthcare organizations compete in what
might be considered the most competitive of industries. The
term competition brings to mind images of contents and
challenges. The Ries and Trout concept that marketing is war
and applies to warfare strategies and tactics to the marketing
process. Ries and Trout note being customer oriented alone is
not enough to achieve marketing success. Entities must also be
competitor oriented.
According to Ries and Trout, marketing warfare can be waged
using four different strategies:
The defensive warfare form should only be used by market

leaders. Entities that possess such strong positions should not,
however, enter hold-and-maintain mode. Instead, they should
seek continuous improvement by attacking themselves. This
involves the routine introduction of new and enhanced offerings
that render the existing products obsolete. Such offerings
ultimately improve the already positive market positions held
by market leaders.
Offensive warfare should be used by those entities falling just
behind market leaders. These entities must target leaders,
seeking to shift market share away from their powerful
positions, preferably at points of weakness. Here, attacks should
be initiated on very narrow fronts, perhaps on single products or
small groups of offerings rather than entire product lines.
The flanking warfare strategy is useful for any entity seeking to
gain market share. This strategy involves the identification and
occupation of new market segments. Although difficult to
discover and develop, new segments offer open, uncontested
terrain for flankers to occupy. The success of a flanking attack
is largely related to the degree of surprise achieved. The
elements of surprise provide valuable time for flankers to
establish beachheads within these new segments, making
competitive responses much more difficult or even impossible.
Guerrilla warfare is most appropriately used by smaller entities
competing in a market of larger competitors. These smaller
entities do not possess the resources to compare directly with
market leaders. Instead, they must identify small market
segments where they can maintain leadership positions.
Next slide.
3

Summary
Ries and Trout’s marketing warfare strategies:
Defensive Warfare
Offensive Warfare
Flanking Warfare
Guerrilla Warfare
Throughout this lecture, we discussed the Ries and Trout’s
marketing warfare strategies. The Ries and Trout concept says
that marketing is war – and marketers need to apply warfare
strategies and tactics to the marketing process. Ries and Trout
note being customer oriented alone is not enough to achieve
marketing success. Entities must also be competitor oriented.
According to Ries and Trout, marketing warfare can be waged
using four different strategies: Defensive Warfare, Offensive
Warfare, Flanking Warfare, and Guerrilla Warfare.
5
PROPERTIES

HSA505
Kaplan & Norton’s Strategy Map
In this lesson we will discuss Kaplan & Norton’s Strategy Map.
Next slide.
1
Topics
Kaplan and Norton’s Strategy Map
Constructing a Strategy Map
Kaplan and Norton’s Strategy Map; and
Constructing a Strategy Map.
Next slide.
2

Global Perspective and Environment Complexity
Strategic Perspectives
Due to their global perspective of the healthcare marketplace
and its vast array of components, healthcare marketers are
frequently charged with strategic management responsibilities.
Such responsibilities are important in any institution, but they
are especially vital in those that operate within environments of
great complexity.
One tool that can provide assistance to healthcare marketers in
carrying out strategic responsibilities is known as the Kaplan &
Norton's Strategy Map. The Strategy Map is essentially an
enhanced illustration of the Balanced Scorecard that depicts the
vision and strategy of an organization along with complying
financial, customer, internal business process, and learning and
growth perspectives. The Strategy Map depicts the strategic
perspectives of organizations and their impact and influence on
the achievement of the overall vision and strategy of associated
entities.
Next slide.
3
Identify Vision
Formulate Costs
Draw Arrows for Linkages
To design a Strategy Map, marketers must do the following:
Identify the vision of the associated entity and the overall

strategy for achieving the vision, placing these items at the top
of the Strategy Map;
Formulate applicable goals and objectives for financial,
customer, internal business process, and learning and growth
perspectives, placing this information on descending levels of
the Strategy Map; and
Draw arrows indicating appropriate linkages to demonstrate the
cause-and-effect relationship leading to the achievement of the
identified institutional strategy, and ultimately vision
fulfillment.
The resulting Strategy Map is then utilized to facilitate strategic
management endeavors.
Next slide.
4
Summary

We started our discussion by describing the Kaplan and
Norton’s Strategy Map. The Strategy Map depicts the strategic
perspectives of organizations and their impact and influence on
the achievement of the overall vision and strategy of associated
entities.
Finally, we reviewed how to construct a Strategy Map. To
design a Strategy Map, marketers must do the followings:
Identify the vision, formulate applicable goals and objectives,
and Draw arrows indicating appropriate linkages.
6
PROPERTIES
Week 10 Discussion 1
Please respond to the following: "Strategy Map"
•Per the text, the health care industry is known as one of the
most complex operational environments, placing a premium on
excellence in strategic planning and management. Determine the
key reasons why health care marketing professionals should
realize such complexity. Provide an example to support your
rationale.
•Appraise the value offered by Ries and Trout’s Marketing
Warfare Strategies in assisting in the understanding and
implementation of competitor-oriented marketing strategies that
can be employed to increase market share. Provide at least two
(2) specific examples of the Ries and Trout’s Marketing
Warfare Strategies Model that apply within a health care

organization with which you are familiar.
Week 10 Discussion 2
Please respond to the following: "Marketing Plan"
•Based on your review of the Learnscape scenario titled
“Learnscape 4: How Are We Doing”, justify the value of
marketing plans as instruments that compel marketers to think
about upcoming periods, perform routine marketing analyses
and audits, and set marketing goals and objectives such as
Return on Investment (ROI), etc. Provide one (1) example of the
use of marketing plans in this fashion to support your rationale.
•Decide whether or not you believe Philip Kotler’s Marketing
Plan Model provides a useful framework for developing an
effective marketing plan. Provide at least two (2) specific
examples of the Philip Kotler’s Marketing Plan Model that
apply within a health care organization with which you are
familiar.
Week 11 Discussion question 1
Please respond to the following: "Course Completion"
•Identify the most significant political, economic, and social
forces that you believe are influencing changes in health care
marketing today.
A C C O U N T I N G & A U D I T I N G
a u d i t i n g
How Do Financial Statement Auditors
and IT Auditors Work Together?
By Joseph F. Brazel

In complex information technologyenvironments, audit quality
is partiíü-ly detemiined by financial statement
auditors" accounting information system
(AIS) expertise and their evaluation of an
IT a u d i t o r ' s assessment. Because of
changes in the auditing standards for pri-
vate and publicly iraded companies. IT
auditors have become common fixtures on
audit engagements. Little is understood
about how these two professions interact.
Through an experiment witii practicing
financial statement auditors, a recent study
tbund that auditors will nsly heavily on the
testing of a competent IT auditor when
assessing control risk and planning sub-
stantive testing. IT auditors can improve
both the effectiveness and efficiency of the
financial statement audit. When IT audi-
tor competence is low. it appears that
only auditors with high levels of AIS
expertise are able to effectively compen-
sate for this deficiency.
The Role of IT Auditors
Statement on Auditing Standards (SAS)
108 Suggests that in complex IT settings
auditors should consider assigning one
or more computer assurance specialists
(i.e., IT auditors) to the engagement in
order to determine the effect of IT on
the audit, gain an understanding of con-
trols, and design and pertbrm tests of IT
controls, fn addition. SAS 109 notes the

importance of IT with respect to auditors"
assessments of control risk. For publicly
traded corporations. Public Company
Accounting Oversight Board (PCAOB)
Auditing Standard 5. An Audit oflntenml
Control over Financial Reporting That
h Integrated with an Audit of Financial
Statements, requires auditors to gain an
understanding and test IT system controls
in order to provide an opinion on the
effectiveness of intemal controls over
fmancial reporting. These auditing stan-
dards, as well as companies" adoptions of
complex IT systems, have suhstantially
enhanced the role of IT auditors on audit
engagements.
tors on fmancial audits will continue to
grow, and auditors will need to expami
their AIS knowledge and skills in order to
perform effective and efficieni audits.
The enhanced role of IT auditors on
financial audits hrings up three qtiestions.
A 20()0 study estimated that the number
of IT auditors employed by one Big Five
firm would grow from 100 to 5.000
between 1990 and 2005 (N.A. Bagranoff
and V.P. Vendrz.yk. "The Changing Role
of IS Audit Among the Big Five US-Based
Accounting Firms," hifomiation Sv.stems
and Control Journal, vol. 5). and IT audi-
tor testing can now represent a suhstantial
portion of the financial statement audit

work. IT auditors have become a chief
source of audit evidence. For example. IT
auditors" tests of system access controls me
relied upon by auditors when making
control risk assessments. As technological
developments continue, the use of !T audi-
First. what do auditors think of IT amiiiois
as a source of audit evidence? Second, how
do these two pn)fessions interact on audit
engagements? And ihird. under what con-
ditions can this relationship be most pro-
ductive?
IT Auditois as a Source
of Audit Evidence
Past research has indicated that audi-
tors have substantial concerns about IT
auditor competence in practice, and
sometimes question the value IT auditors
bring to the audit engagement (Bagranoff
and Vendrzyk 2000; James E. Hunton.
Amold M. Wright, and Sally Wright. "Are
38 NOVEMBER 2008 / THE CPA JOURNAL
Financial Auditors Overconfident in Their
Ability to Assess Risks Associated with
Enterprise Resource Planning Systems?"
.tounuú of Infonncition Systems. Fall 2(X)4).
Currently, increased demand for IT audi-
tors due to the aforementioned standards
has resulted in IT auditors' resources being

stretched over more audit engagements,
as well as audit firms losing highly com-
petent IT auditors to corporations looking
lo improve the effectiveness of their own
intemal controls (C. Annesley. "Manual
Processes Must Be Automated to Cut Cost
of Sar banes-Ox ley Audits. Says Basda."
Computer Weekly, October 25. 2005;
Nonii£Ji Marks, "Maintaining Control: Will
a Boom in Intemal Auditing Result in a
Bust in Audit Quality?," Internal Auditor.
February 2005).
These findings were confirmed by the
author s own study. Participants were asked
to respond, on a scale from 1 (disagree)
to 10 (agree), whether they had experienced
variation in IT auditor competence. The
nieiui response was 7.23. The author does
not conclude that there i.s a competency
problem with IT auditors, but, rather, that
their competency levels vary in practice.
On the other hand, another study has
shown that IT auditors are better at
assessing risks in enterprise resource
plann ng (ERP) environments and that
auditors appear to be overconfident in their
abiiititrs in such settings (Hunton, Wright.
and W right 2(K)4). This overconfidence. as
well as high IT auditor billing rates, may
help explain why auditors are sometimes
hesitant to employ IT auditors, beyond
the minimum firm-established require-
ments, on their engagements.
Interacting on Audit Engagements

While audit managers are typically sen-
sitive to competence deficiencies in their
audit ;̂talf and can compensate hy employ-
ing additional procedures themselves,
auditors" ability to effectively respond to
IT autlitor competence deficiencies may be
detem lined by their own AIS expertise level.
As the AIS expertise of an auditor incnsas-
es, the auditor's km>wledge of system design
and controls should be greater and, thus,
provide the auditor with a clearer under-
standing of what system controls the IT
auditor has (or has not) tested, as well as
Ihe ability to compensate for the FT audi-
tor's competence deficiencies. The pairing
of a less competent IT auditor with an audi-
tor who maintains a low level of AIS exper-
tise may lead to an ineffective audit.
Auditors with low AIS expertise may
over-rely on weak IT auditor tests because
they lack the AiS expertise to indepen-
dently identify sy.stem risks and perform IT-
related tests themselves. Conversely, when
the IT auditor assigned to the engagement
is highly competent, all auditors should ben-
efit from their inclusion on the engage-
ment team, as they can rely more on the
IT auditor's testing and concentrate more on
matters related to the financial statement
audit. In summary, investigating the audi-
tor-IT auditor relationship requires analyz-
ing both the competence of the IT auditor
as well as the AIS expertise the auditor
brings to the engagement

A Productive Relationship
To examine how auditors are interacting
with IT auditors, one study had 74 practic-
ing auditors complete an experimental audit
case study that asked them to supply risk
assessments and plajined testing decisions
in an ERP setting (see Joseph F. Brazel and
Christopher P. Agoglia. "An Examination
of Auditor Planning Judgments in a
Complex Accounting Infonnation System
Environment," Contemporary Accounting
Research. Winter 2007). Thirty-five of the
auditors r^eived intemal ccmtrol testing doc-
umentation concluding that system con-
trols were reliable from a highly compe-
tent IT auditor, while the odier 39 auditors
nxeived the exact same evidence from an
IT auditor with low competence. To manipi-
ulate IT auditor competence between the
two groups, auditors were given informa-
tion about the extent of the FT auditor's prior
training, experience, and performance (either
all high or all low). As a check, partici-
pants later noted that both the high and
low IT auditor competence descriptions
were equally realistic. The study measured
and assessed each auditor's AIS expertise
level as either high or low via multiple scales
measuring the auditor's experience ;ind train-
ing with complex AIS. Thus, the experi-
mental study consisted of four groups (see
Exhibit I).

The study provided all participants
with a ca.se that contained background
information for a hypothetical client, rele-
vant authoritative audit guidance, and
several prior-year workpapers. Thefie work-
papers included prior-year risk assessments
and substantive testing for the sales and
collection cycle. Participants also received
a current-year workpaper documenting the
client's implementation of an ERP system
module for the cycle and infomiation that
an IT auditor would be assigned to the
engagement to test system controls. The
current-year workpaper noted multiple
potential implementation problems, includ-
ing the migration of legacy-system data
to the ERP system due to a mid-year con-
version and the integration of a bolt-on
internal control package with the system.
Next, participants received information
about the IT auditor's competence level
(either high or low) and the IT auditor's
control tests, which concluded that "sys-
tem-related controls appear reliable."
Particip^mts then assessed and dix'unient-
ed a control risk assessment and planned
the nature, staffing, timing, and extent of
substantive procedures for the cycle. Lastly.
the authors had auditors at the senior man-
ager and partner levels evaluate the effec-
tiveness of the participants' judgments.
These evaluators had extensive experience
auditing companies with complex AIS.
Control Risk Assessments
After reviewing all of the case study

materials, participants assessed control risk
for the cycle on a scale ranging from 0
EXHIBIT 1 ]
Participants by Group
High Auditor AIS Expertise
Low Auditor AIS Expertise
Low IT Auditor
Competence
n = 18
n ^ 2 1
High IT Auditor
Competence
n = 18
n = 17
n - Number of practicing audit senior participants in each
experimental group.
NOVEMBER 2œ8 / THE CPA JOURNAL 3 9
EXHIBIT 2
Graphical Presentations ofthe Study's Results

Panel A: Participants' Mean Control Risk Assessments
70
SO
120
tío
100
es.s9
52.57
AIS Expertise
O High
* Low
54.47
* 3a.B7
Low High
IT Auditor Competence
Panel C: Participants' Mean Staffing Decisions
AIS Expertise
O High
^ Low
4.12

23a
Z53
127
Low High
iT Auditor Competence
Panel E: Participants' Mean Extent Decisions
AIS Expertise
O HJQh
* Low
* 104.20
38.70
95.68
Low High
6.50
6.00
5.50
5.00
4.00

Panel B: Participants' Mean Nature Decisions
13.53
n.n
AIS Expertise
O Hiflh
* Low
Lovy High
Panel 0: Participants' Mean Timing Decisions
AIS Expertise
O High
^ Low
50.47
34.20
3167
" * 34.40
Low High
Panel F: Participants' Mean Testing Effectiveness

S.24
AIS Expertise
O High
* low
Low High
Controi risk was assessed by participants on a scale ranging
from 0 ("low risk") to 100 {"high risk") percent. Nature refers
to the total num-
ber of procédures planned. Staffing was computed as the total
number of procedures assigned to a more senior-level auditor
than to a staff
assistant Timing was measured as the total number of testing
hours budgeted at fiscal year-end (versus interim). Extent refers
to the total
number of budgeted audit hours. Effectiveness was determined
by experts and computed as the experts' mean effectiveness
ratings of par-
ticipants' audit programs on 10-point scales (1 = "very low"; 10
- "very high").
4 0 NOVEMBER 2008 / THE CPA JOURNAL
(very low) to 100 (very high). Exhibit 2.
Panel A. presents the resuhs relating to
mean control risk assessments for the
study's four groups. What the study

found was that the competence of the IT
auditor had a substantial effect on auditors'
control risk assessments. Essentially, as the
competence of the IT auditor increased,
auditoi*s tended to rely on their positive
control testing results and assessed con-
trol risk as lower. Thus, in Panel A, all lines
slope downward. This pattern emerged for
auditors with both high and low AIS exper-
tise. Given their superior knowledge of sys-
tems and the potential system risks posed
in the case study, however, auditors with
higher AIS expertise tended to assess
control risk as higher, regardless of the IT
auditoi's level of competence.
Testing Decisions
Upĉ n completion of their control risk
assessments, participants planned the nature.
staiTin;̂ . timing, and extent of substantive
testing for the cycle. The study measured
the "n;ilure" and "staffing" of participants'
testing decisions as the total number of pro-
cedures planned and the number of proce-
dures assigned to a more senior-level audi-
tor than staff assistant, respectively. The
"timing" and "extent" of participants' test-
ing decisions were computed as the totiil
number of testing hours budgeted at fiscal
year-end {versus interim) and the total num-
ber of budgeted audit hours, respectively.
Panels B-F in Exhibit 2 graphically illus-
traie the testing decisions of the study's four
group^, as well as the effectiveness of their
testing decisions [evaluated by experienced

auditors on a scale ranging from I {very
low) to 10 {very high)].
For the most part, a typical pattern can
be seen in Panels B-F. When IT auditor
competence is high {right-hand side of
the graphs), the testing decisions of audi-
tors with low and high AIS expertise are
generally the same, mtxlerate in scope, and
reasonably effective. Competent IT audi-
tors appear to let all auditors rely on their
system testing and concentrate on the non-
system testing in which they are adept {e.g.,
accounts receivable confimiation, analyti-
cal procedures related to sales). On the
other hand, when IT auditor competence
is low (left-hand), there appears to be a
substaiitial difference between the testing
decisions of auditors with low and high
AIS expertise. These results suggest that
the superior knowledge base of auditors
with high AIS expertise allows them to
effectively expand the scope of substantive
tests, to include their own tests of the sys-
tem, when there are IT auditor competence
deficiencies. Unfortunately, when auditor
AIS expertise is low, it appears that under-
auditing may result. Indeed, the pairing of
low IT auditor competence and low audi-
tor AIS expertise had the lowest mean
effectiveness rating in Panel F (4.87).
If the above results show that auditor
AIS expertise can play an impotiaiit role
in ERP settings, what role does the gen-

eral audit expérience of the auditor play?
The answer appears to be very little; at
the very least, AIS expertise seems to
trump general audit experience in an ERP
setting. The authors examined the effects
of general audit experience on both the
judgments of the participants, as well as
the effectiveness of those judgments.
Results showed no relationship between
general experience and these factors.
Thus, when assigning staff to an audit
engagement, it may be prudent to con-
sider the staff members' levels of AIS
expertise (with respect to the elient's AIS),
in addition to their general audit experi-
ence levels. In other words, a fourth-year
senior with high AIS expertise may be
more valuable than a fifth-year senior with
a lower level of AIS expertise.
Conclusion
To answer the three questions posed
above: Auditors perceive that IT auditor
competence varies in practice, both audi-
tor AIS expertise and IT auditor compe-
tence affect how these two professions
interact on an audit engagement, and this
relationship can be most productive when
at least one {preferably both) of the two
professions exhibits expertise or compe-
tence related to a company's IT system.
The findings of the study have implications
for practice and education. For example.
given the potential for deleterious effects
in complex IT settings, PCAOB inspection

teams should consider evaluating whether
policies {e.g., training, scheduling) are in
place to ensure Kith the competence of the
IT auditor and the AIS expertise of audi-
tors assigned to the engagement. The
results of this study clearly point to the
advantages of sufficiently training both
auditors and IT auditors so that they are
equipped with the requisite expertise, given
the complexity of their clients' IT.
In light of recently increased auditor
responsibilities with respect to intemal con-
trol assessment, auditors should consider
the implications for audit efficiency and
effectiveness if they either alienate addi-
tional intemal control testing to IT auditors
or provide auditors with greater training
in evaluating IT risks and performing
tests of IT. When IT is used to maintain
the general ledger, it's worthwhile noting
that SAS 109, Understanding the Entity
and Its Environment and Assessing the
Risks of Material Misstatement, discusses
how nonstandard joumal entries "may exist
only in electronic fonn and may be more
easily identified thn)ugh the use of com-
puter-assisted audit techniques." Should
auditors be perfomiing these procedures?
Will they be effective? O would it be mons
effective and efficient io rely on an IT audi-
tor to perform this task? Firms could also
explore ways in whieh to improve the IT
auditor-auditor relationship (e.g.. eombined
training and increased communication

thniughout the audil).
From an eduaiticinal standpoint, the study
points to an increasing need to improve the
system-related educational experiences of
accounting students who will be the IT and
financial statement auditors of the future.
Undergraduate and master's degree pmgrams
in accounting might want to partner with
management information systems depart-
ments, or develop faculty strengths in the
field of AIS, in OTder to incorporate an IT
concentration into their programs. After hav-
ing completed three years of Sarbanes-Oxley
section 4(>4 audits, auditors now know the
specific skill sets needed to eflectively per-
form these audits in a complex AIS setting.
Accounting academics should maintain an
open dialogue with these pn>fe,ssionals when
developing and updating their system-retat-
ed acaiunting classes. Such advances in edu-
cation should help provide the profession
with accounting graduates who have the
required skill set to llourish in the complex
IT settings of the future. •
Joseph F. Brazel, PhD, is an assistant
professor of accountitig at the college of
management at North Carolina State
University, Raleigh, N.C.
NOVEMBER 2008 / THE CPA JOURNAL 4 1

Student Name Brief #5 Use of Audit Software: Review and
Survey Date
Central Message: Auditing has had to change from “around the
computer” to “through the
computer” due to sources only being available in electronic
form. CAATs and CAATTs improve
efficiency and effectiveness of audits. A variety of standards
and statements were issued because
new guidance was necessary once the growth of IT affected the
nature, timing, and extent of audit
procedures. Continuous auditing is the key to improving the
efficiency and effectiveness of audits.
Author’s Theme: Auditors are advised to use CAATs to gather
evidence so that they can increase
the efficiency of inspection and analytical review. One of the
many statements released on IT, SAS
94, stressed that IT’s impact on internal control is a result of
the nature and extent of the system’s
complexity rather than the size of the firm, which is why
auditing through the computer is
important when testing controls. Auditors can pinpoint the risk
areas and thus have a better idea of

what to inquire when questioning management; improving the
quality of the evidence and thus the
audit. Importance: Advancement in information technology has
a direct impact on business
processes and the audit. Increasingly, auditors are required to
perform audits in computerized
environments; therefore, additional standards are required to
ensure that financial statements
auditors continue to perform high quality audits.
Conclusion/Opinions: (1) The author concludes
that auditing through the computer is important when testing
controls because of the impact IT has
on internal control. GAAS field work #2 supports this because
the IT system is a part of the entity’s
environment, and especially, when it is complex, the auditor
must audit through the computer to
adequately assess internal control risk. (2) Using CAATs can
increase the efficiency of audit
procedures. SAS No. 106 indicates that CAATs allow auditors
to inspect electronic evidence directly.
(3) Auditors should use data analysis from audit software in
order to pinpoint the risk areas and
gain a better idea of what to ask management. AS # 5 states that
risk assessment underlies the

entire audit process, including the determination of significant
accounts and relevant assertions,
selecting controls to test, and determining the evidence
necessary.

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