IMPACT OF CIS

1. CIS in Business

2. CIS in the Accountancy Profession

3. Manual vs. Computer systems

I. Impact of CIS on Business:

The effect of changes on the accounting process may be stated as under:
A. Primary Changes
1) Process of recording transactions - The process of recording transactions
undergoes a major change when accounting processes are computerized
under a CIS environment, the order of recording transactions from basic
documents to prime books (special journals) and finally to principal book
(ledger) may not be followed strictly in sequential from as is observed in a
manual system. Impact of CIS on Business:
In many cases, all the processes - Prime book of Entry Ledger, Final
accounts (Balance Sheet and Profit a Loss Account) are carried on
simultaneously.
2) Form of accounting records - Mechanization often results in the abandonment
in whole or in part of the primary records. Punch card installation or electronic
data processor changes the form of both intermediate and ultimate records
much more radically than manual records.
3) Use of loose-leaf stationeries - Bound handwritten records as used in manual
accounting processes are replaced by loose-leaf machine-written records in an
electronic medium. In a computerized information system, DVDs, online
storage, print- outs replace traditional records. This necessarily requires proper
control over such records to prevent unauthorized use, destruction, or
substitution.
4) Use of accounting code – In computerized information systems, alpha-numeric
codes are extensively used to represent names and descriptions. The
accountants and the auditors have to familiarize themselves with the use of
such codes, which initially may pose considerable problems in understanding
the various transactions. These codes are listed and compiled in the business
chart of accounts.
5) Absence of link between transactions - In a computerized information system
environment, there may be an inadequacy or even total absence of cross-
reference between the basic documents, primary records, and principal
records. This creates special problems for the auditors. The auditors may find
it difficult to trace a transaction from start to finish which leads to a lack or loss
of the usual audit trials in manual systems.
 B. Recent Changes
The growth and development in the field of information technology are fast-paced and
unless the auditors are alert to such developments and take pre-emptive action in
upgrading their knowledge, they may find difficulty in coping with such advancement.
Following are a few instances of the recent changes which may need to be addressed
in discharging the businesses’ responsibilities in a CIS environment:
a) Mainframes are substituted by mini/micro users.
b) There is a shift from the proprietary operating system (Windows, MAC OS) to
more universal ones like LINUX-based OS, Linux Mint, Ubuntu, Fedora,
Solaris, Free BSD, CentOS, Chrome OS, Debian, etc.
c) Relational Data Base Management (RDBMS) is increasingly being used.
RDBM is a common type of database whose data is stored in tables.
(www.sisense.com)
d) The methodology adopted for systems development is becoming crucial and
CASE (Computer Aided Software Engineering) tools are being used by many
organizations. CASE software is often associated with methods for the
development of information systems together with automated tools that can be
used in the software development process. (en.Wikipedia.org)
e) End-user computing is on the increase resulting in the decentralized data
processing. refers to computer systems and platforms that are meant to allow
non-programmers to create working computer applications.
(www.technopedia.com)
f) The need for data communication and networking is increasing.
g) Common business documents are getting replaced by paperless electronic
data interchange (EDI). Electronic data interchange (EDI) is the electronic
transmission of structured data by agreed message standards from one
computer system to another without human intervention.
(www.technopedia.com)
h) Conventional data entry gives way to scanners, digitized image processes,
voice recognition systems, etc.

II. Impact of CIS on the Accountancy Profession

The use of computers may effect changes in the way accountants/bookkeepers process
transactions in the accounting systems:
1) Documents are not maintained in readable form
In manual and batch systems, entities generally establish controls that require
employees to record on paper documents that they have authorized or approved
a transaction or performed an independent check. In a manual system, for
example, a sales invoice is prepared manually for entry into the accounting system.
In a small business, an invoice may be prepared either manually or by the system.
In real-time systems, however, no paper documentation is prepared to serve as
the basis for recording the transaction. Ex. Instead of preparing a sales order by
 hand, a clerk enters the transaction directly into the system. Also, most entities
maintain a specific transaction online for only a limited time. To access information
that is no longer online, one can retrieve and examine the data from offline storage
media.
2) Processing of transactions is more consistent
In a manual system that is run by people, transactions may not be consistently
processed. Errors may occur because employees are not adequately trained, fail
to pay attention to work or become ill or fatigued. A computerized data processing
system that has been properly tested before being used and has appropriate
safeguards generally runs consistently so long as hardware failures do not occur.
3) Duties are consolidated
Companies using manual systems have separate duties involving authorization,
recording, and custody to ensure the validity of the financial statement assertions.
Independent checks on performance in manual systems are very important. In
batch, real-time or small-business systems, duties are frequently combined within
the system and independent checks on performance are not possible. The
programs in such systems often perform procedures equivalent to the independent
checks in a manual system.
4) Reports can be easily generated
Computerized systems provide for, or allow users to generate necessary reports
about the status of transactions or accounts in a minimal amount of time. Such
systems are designed so that the detailed transactions or accounts reconcile to
the control account.

III. Impact of CIS in the Auditing Profession:

a) Wide-spread end-user computing may result in unintentional errors creeping into
systems owing to inept handling. Also, coordinated program modification may not be
possible.
b) Collecting evidence on the reliability of a computer system is often more complex than
collecting evidence on the reliability of a manual system. Auditors have to face a
diverse and complex range of internal control technology that did not exist in manual
systems.
c) Usage of sophisticated audit software would be a necessity.
d) Auditors’ non-participation in System Development Life Cycle State (SDLC) poses a
considerable problem in understanding the operational controls.
e) Data communication and networking would introduce new audit risks.
f) The move toward paperless EDI would eliminate much of the traditional audit trail
radically changing the nature of audit trails.
g) With the increasing complexity of computer systems and control technology, it is
becoming more and more difficult for auditors to evaluate the consequences of
strengths and weaknesses of control mechanisms for placing overall reliability on the
system.
Manual Computer

1. Different persons are responsible for functions The computer system may be programmed to
such as initiating, recording and safeguarding carry out one or more functions that would
assets normally be incompatible in a manual system. Ex.
a program may carry out reconciliation of vendor
invoices against a receipt document and also
prepares a cheque payable to creditors. These
functions are considered incompatible in a manual
system.
2. A structured authority and responsibility is an In a computer system, however, a clean line of
essential control in a manual system. authority and responsibility might be difficult to
establish because some resources are shared
among multiple users. This controls problems that
arise with maintaining redundant data when
multiple users have access to the same data
However when the integrity of the data is
somehow violated, it is not always easy to trace
who is responsible for corrupting the data and who
is responsible for identifying and correcting the
error.
3. In a manual system, auditors evaluate the In a computer system, authorization procedures
adequacy of procedures for authorization by are often embedded within a computer program.
examining the work of employees. In a computer system, it is also more difficult to
assess whether the authority assigned to
individual persons is constant with management
policies.

4. In a manual system, adequate documents and In a computer system, document support might
records are required to provide an audit trail of not be necessary to initiate, execute, and records
activities within the system. some transaction. In well-designed computer
systems, audit trails are more extensive than
those maintained in manual systems unfortunately
not all computer systems are well-designed, which
poses a challenge for auditors.

5. Physical access to assets and records is very In a computer system, the information system
critical in manual systems. assets and records may be concentrated at a
single site. The concentration of information
systems assets and records also increases the
losses that can arise from computer abuse or
disaster.
6. Supervision of employees is usually done within In a computer system, the supervision of
the same office through observation and inquiry. employees might have to be carried out remotely.
Supervisory controls must be built into the
computer system to compensate for the controls
that usually can be exercised through observation
and inquiry.

Managers must periodically access the audit trail

of employee activities and examine it for
unauthorized actions.

7. Checks by an independent person help to In a computer system, if a program code is

detect any errors or irregularities. authorized accurate, and complete the system will
always follow the laid down procedures in
absence of other types of failures like hardware or
systems software failure.

8. In a manual system, independent staff prepares In a computer system software is used to prepare
the basic data used for comparison purposes. this data. If unauthorized modifications occur to
the program or the data files that the program
uses, an irregularity might not be discovered,
because the traditional separation of duties no
longer applies to the data being prepared for
comparison purposes.