(a) (ii) Problems on the audit of Tirrol
Timescale – six week reporting deadline – audit planning
The audit report is due to be signed six weeks after the year end. This means that there will be considerable pressure on the auditor to complete audit work without compromising standards by rushing procedures.
This problem can be overcome by careful planning of the audit, use of experienced staff and ensuring other staff such as second partner reviews are booked well in advance.
Timescale – six week reporting deadline – software issues
The audit report is due to be signed about six weeks after the year end. This means that there is little time to write and test audit software, let alone use the software and evaluate the results of testing.
This problem can be alleviated by careful planning. Access to Tirrol Co’s software and data files must be obtained as soon as possible and work commenced on tailoring Cal & Co’s software following this. Specialist computer audit staff should be booked as soon as possible to perform this work.
First year audit costs
The relative costs of an audit in the first year at a client tend to be greater due to the additional work of ascertaining client systems. This means that Cal & Co may have a limited budget to document systems including computer systems.
This problem can be alleviated to some extent again by good audit planning. The manager must also monitor the audit process carefully, ensuring that any additional work caused by the client not providing access to systems information including computer systems is identified and added to the total billing cost of the audit.
Staff holidays
Most of the audit work will be carried out in July, which is also the month when many of Cal & Co staff take their annual holiday. This means that there will be a shortage of audit staff, particularly as audit work for Tirrol Co is being booked with little notice.
The problem can be alleviated by booking staff as soon as possible and then identifying any shortages. Where necessary, staff may be borrowed from other offices or even different countries on a secondment basis where shortages are acute.
Non-standard systems
Tirrol Co’s computer software is non-standard, having been written specifically for the organisation. This means that more time will be necessary to understand the system than if standard systems were used.
This problem can be alleviated either by obtaining documentation from the client or by approaching the software house (with Tirrol Co’s permission) to see if they can assist with provision of information on data structures for the inventory systems. Provision of this information will decrease the time taken to tailor audit software for use in Tirrol Co.
Issues of live testing
Cal & Co has been informed that inventory systems must be tested on a live basis. This increases the risk of accidental amendment or deletion of client data systems compared to testing copy files.
To limit the possibility of damage to client systems, Cal & Co can consider performing inventory testing on days when Tirrol Co is not operating e.g. weekends. At the worst, backups of data files taken from the previous day can be re-installed when Cal & Co’s testing is complete.
Computer systems
The client has 25 locations, with each location maintaining its own computer system. It is possible that computer systems are not common across the client due to amendments made at the branch level.
This problem can be overcome to some extent by asking staff at each branch whether systems have been amended and focusing audit work on material branches.
Usefulness of audit software
The use of audit software at Tirrol Co does appear to have significant problems this year. This means that even if the audit software is ready, there may still be some risk of incorrect conclusions being derived due to lack of testing, etc.
This problem can be alleviated by seriously considering the possibility of using a manual audit this year. The manager may need to investigate whether a manual audit is feasible and if so whether it could be completed within the necessary timescale with minimal audit risk.
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