The document discusses the benefits and disadvantages of computerized audits in an EDP environment, highlighting advantages like speed, accuracy, cost efficiency, and better data management while noting challenges such as unsuitability for small businesses and risks of fraud. It outlines three auditing approaches: auditing around, with, and through the computer, emphasizing the need for reliable internal controls. Additionally, it categorizes these controls into general EDP controls and EDP application controls to ensure effective auditing and management of accounting systems.

1. EDP Environment

2. BENEFIT OF COMPUTERIZED AUDIT
1) Speed : the work of recording of transactions , preparation of
books , accounts can be done with greater speed.
2) Greater accuracy : the chances of arithmetical errors and
human errors are reduced to minimum.
3) Greater economy: under the mechanized accounting system,
work can be done with minimum staff, with minimum cost.
4) Better records: records prepared by machines are neat and
clean. It is more legible, systematic and uniform.
5) Greater information : various types of information and
statistical data regarding the operation of the business can be
easily collected.

3. 6) Interim accounts : interim accounts can be prepared
without delay. This will help the management to declare
interim dividend.
7) Analysis of data : once the basic information is feed into the
computers, it can be sorted in many different ways to provide
analysis of statement .
8) Avoid overtime : the work of accounts are done quickly , the
accounts can be prepared without any loss of time.
9) Reduction in audit fee: the work load of audit works is
reduced by the computers. Hence the computerized audit
reduces audit cost.

4. BENEFIT OF COMPUTERIZED
AUDIT
10) Computerized audit reduces the monotony of audit work
11) Computerized audit enhances the reliability of audit
12) Computerized audit ensures flexibility in the audit
programme.
13)Computerized audit is helpful for the smooth functioning
of auditing

5. PROBLEMS OR DISADVANTAGES
1) It is not suitable for small business forms.
2) Difficulties to detect the errors and frauds.
3) Absence of supporting vouchers.
4) Storage problem
5) Computer frauds and computer virus.
6) Easy to make alterations
7) It creates unemployment.
8) Absence of input documents.
9) Lack of visible output
10) Coding problem.

6. AUDIT APPROACHES IN AN EDP
ENVIRONMENT
There are three approaches to auditing in an
EDP environment . They are
1) Auditing around the computer
2) Auditing with the computer
3) Auditing through the computer

7. AUDITING AROUND THE COMPUTER
Auditing around the computer is an audit
approach under which an auditor carries out the
audit in the same way as in a traditional or Manual
system except that, instead of examining hand
written books, he examines computer printouts.

8. Auditing with computers: -
 under this approach, the auditor does the audit work
with the help of computers that is general software.
Under this approach, audit work is carried on in an
traditional manner, but the computer software is
used for certain operations.

9. Auditing through the computer
Auditing through the computer means making
use of computer in auditing. Under this approach the
auditor evaluates the internal control relating to EDP
and on the basis of evaluation , he determines the
nature , timing , and extent of his sustentative
procedures.

10. INTERNAL CONTROL UNDER AN
EDP ENVIRONMENT
For the control of various problems connected with
the installation and operation of computers in accounting
and auditing, there should exist an adequate and
satisfactory internal control system in the undertaking .
The internal control system should be reliable , effective,
and should provide timely , authorized and required data
from the system. The various internal controls required to
be enforced under an EDP environment may be broadly
classified into two categories.

11. EDP environment
They are,
1) General EDP controls
2) EDP application controls

12. GENERAL EDP CONTROLS.
The purpose of general EDP control is to establish a
frame work of overall control over EDP activities. Some
of the important general EDP controls are,
1) Division of responsibility or duties.
2) Control over development and maintenance of software
3) Control over operators.
4) Control over data access and program access.
5) Control over editing of data.
6) Storage control.
7) Hardware control.

13. EDP APPLICATION CONTROL
For the smooth working of EDP system, besides
the general EDP controls, there should certain
special EDP application controls. The important EDP
application controls are
1) Control over input
2) Control over processing
3) Output control