Assingment on E-Auditing

Course Tittle: Auditing

Course Code: ACT423
School of Business Studies
Southeast University
 Table of content
Content Page
No.
1.Introduction 1
2. Features of E-Auditing 1
3. Concept of E-Audit 2

4.Objectives of E-Auditing 3
4.1.The objective of an audit may be classified as 3

4.1.1.Primary Objective 3
4.1.2.Subsidiary or Ancillary objectives 3
4.1.3.Specific objectives 3
4.1.4.Qualification and Qualities of an Auditor 4
4.1.5.Professional Qualities 4
5.E-Audit Process 5

5.1.What it is? 5

5.1.1.Planning of e-audit 5

5.1.2.Notification e-audit 5
5.1.3.Opening Meeting e-audit 5

5.1.4.Fieldwork e-audit 5
5.1.5.Report Drafting e-audit 5
5.1.6.Management Response e-audit 5
5.1.7.Closing Meeting e-audit 5
5.1.8.Final E-Audit Report Distribution 5
5.1.9.Follow-up e-audit 5
5.1.10.Receive vague e-audit assignment 5
5.1.11.Gather information about the e-audit subject 6
5.1.12.Determine e-audit criteria 7
5.1.13.Break the Universe into Pieces of e- audit 8
 5.1.14.Refine the e-audit objective 8
5.2.The Auditor’s Response – also known as Detection Risk 8

6.Bangladesh E-Audit Process 9

7.World E-Audit Process 11
8.E-Auditing vs Traditional Audit 13
8.1.Traditional Audit 13
8.2.E-Auditing 14

9.Advantages and Disadvantages of E-Auditing 14

9.1.Advantages of E-Auditing 14

9.2.Disadvantages of E-Auditing 15

10.Basic Principles Governing an E-Audit 15

10.1.Thorough examination of all systems 15

10.2.Internal Controls Assessment 16

10.3.Arithmetic Precision 16

10.4.Principles of Accounting 16

10.5Assets Verification 16

10.6.Liabilities Verification 16

10.7Attestation 16

10.8.Statutory Obligations 16

11.Challenges implementing E-Audit 17

11.1.Different Filling Requirement 17

11.2.Requires Technology 17

11.3.Changing Over Systems 17

11.4.Security Considerations 17

12.Conclusion 18
1|Page

1.Introduction

Auditing is a systematic and independent examination of data, statements, records, operations

and performances (financial or otherwise) of an enterprise for a stated purpose. The Full form
of E-AUDIT is electronic Automated Data Input Terminal, or AUDIT stands for Automated
Data Input Terminal, or the full name of given abbreviation is Automated Data Input Terminal.
An audit is an independent examination of the accuracy and fairness of accounting, accounting,
and financial statements of economic entities engaged in the production and sale of goods,
services, and work. An audit involves performing procedures to obtain audit evidence about
the 55th International Scientific Conference on Economic and Social Development – Baku, 18-
19 June, 2020 379 amounts and disclosures in the financial statements of the entity. The basis
of the audit is the mutual interest of the state the management of the enterprise, and its owners
(depositors, shareholders). In some countries, an audit is an examination of an entity and the
presentation of an opinion on its financial statements. In our world, which is on the threshold
of the 4th Industrial Revolution, as a result of the rapid development of technology, the
electrification of the accounting and auditing process is one of the factors. The State Tax
Service (former Ministry of Taxes) has been implementing the Automated Tax Information
System in Azerbaijan for more than 10 years. Automated Tax Information System is a large
software and hardware complex consisting of central servers running a single database and
application software, network equipment that allows users and taxpayers to connect to central
servers, and process the data collected in the central database to obtain various reports and
analyzes. Electronic audit is a tax audit performed by the taxpayer with direct or remote access
to accounting information stored in electronic format through special software. Behavioral
accounting is the behavior of people when they encounter a accounting event. The emergence
of this term plays a major role in the behavioral economy. The main principle of the economy
is "Homo Economics", which refers to people trying to get the most out of resources.

2.Features of E-Auditing
It is a systematic procedure of examining the financial records of an organization. Its main
objective is to find out any frauds or errors in the financial records. It is conducted either by
the auditors who have in-depth knowledge of accounting procedures and legal formalities. It
ensures the truth and fairness of the financial statements if it reflects the exact status of the state
of affairs of the business. It also ensures that the statements follow the accounting standards.
2|Page

3.Concept of E-Audit

E-Audit means Electronic auditing, or e-auditing, is computer-assisted auditing that uses

electronic records to complete part or all of your audit. This follows similar procedures as a
traditional audit but using electronic means to remotely perform the audit. E-auditing is also
known as Remote Auditing. For any number of reasons, having an assessor physically inside
your walls for an assessment can prove needless with certain types of audits. Of course, it’s
preferable, if not mandatory, depending on the nature of the audit, but we’re also moving into
a period of time where technology has enabled new types of audits that often don’t require their
presence. This can be performed using video conferencing and screen
sharing software including Google Hangouts, Skype, etc. All documents can be shared through
Google Drive, Email or similar document sharing platforms. Conducting an e-audit has many
benefits including saving time, reduce the travel to remote regions, less paper required
and, witnessing and tracking the audit in real-time. Auditing is the process of checking the
financial statements along with other accounting information of a business entity. It is a
systematic procedure where the economic condition of the entity is analyzed. The person taking
up the responsibility of the process is called an “Auditor”. In this process, it is checked if the
business is running profitably or not. Auditing is an important process for the company, the
investors, the government, creditors, shareholders, etc. They very much rely on audit reports
to make important business decisions. n audit is when an auditor examines or inspects various
books of accounts, followed by a physical inventory check, to ensure that all departments are
using a defined system of recording transactions. It is done to ensure that the financial
statements presented by the organization are accurate. Internal auditing can be done by
employees or department heads, and external auditing can be done by a firm or an independent
auditor. The goal is for an independent body to audit and verify the accounts to ensure that the
books of accounts are completed fairly and that no misrepresentation or fraud is taking place.
Before they can announce their quarterly results, all publicly traded companies must have their
accounts examined by an independent auditor. What qualifications do you need to perform an
audit? Any institution in India will have an independent audit conducted by chartered
accountants from the Institute of Chartered Accountants of India or ICAI. Principles are set out
by CPAs in the United States (Certified Public Accountants). There seem to be four steps to
the auditing process. The very first stage is to establish the auditor's position and terms of
engagement, which is typically done through with a letter signed by the client. The second
phase is to prepare the audit, which gave information like timelines and organizations that will
be scrutinized by the auditor. Is the auditor in charge of a particular division or the rest of the
company? The audit could last a day or even a week, due to the nature of the audit. When an
auditor examines a company's accounts or inspects its major financial statements, the results
are usually published in a report or prepared methodically. Analyzing the findings is the final
and most important element of an audit. The conclusions of the auditor are detailed in the
report. Principles of Auditing The basic principles of auditing are planning, honesty, secrecy,
audit evidence, internal control system, skill and competence, work done by others, working
papers, and legal frameworks. Audit Report Now we know what is meant by auditing. As
discussed above, it is the inspection of financial statements of a business entity followed by
3|Page

checking inventory. Based on this investigation and assessment of the financial records, the
auditor gives his opinion regarding the financial position of the organization in the form of a
report. It is ensured that the statements are prepared following the accounting standards, they
comply with all statutory requirements and proper presentation of the records is done with all
matters duly disclosed.

4.Objectives of E-Auditing

4.1.The objective of an audit may be classified as

(a) Primary Objective
(b) Subsidiary Objective
(c) Specific Objective
4.1.1.Primary Objective
To ensure that the primary objective of audit is achieved, an auditor must:
(a) Examine the Internal Control and Internal Check.
(b) Verify whether all the books of accounts as required by law are kept.
(c) Verify whether proper accounting principles and procedures are followed.
(d) Check the arithmetical accuracy of the books of accounts.
(e) Verify the authenticity and validity of the transactions.
(f) Confirm the existence and the values of the assets and liabilities by physical verification.
(g) Find out whether the financial statement is properly drawn up.
(h) Report whether the profit and loss gives a true and fair view of the profit or loss for the year
and Balance sheet gives a true and fare.
4.1.2.Subsidiary or Ancillary objectives: -
Subsidiary objectives of auditing are
(1) Detection and prevention of errors. Errors of Omission, Commission, Compensating and
Duplication)
(2) Detection and prevention of frauds. (Misappropriation of Cash, Goods and Accounts)
4.1.3.Specific objectives
There will be specific objective in respect of each type of specific audits. For example, in
operational audit, the aim of audit is to evaluate the existing operations of the entity in order to
give expert advice to improve their efficiency. The cost audit is to check the cost records of the
entity in order to make a report on the proper ascertainment of cost of production of goods or
4|Page

services. Depending upon the nature of specific audit, there may be different objective in
respect of each specific audit.
4.1.4.Qualification and Qualities of an Auditor
To be an efficient auditor, an auditor must possess certain professional qualifications and
professional and personal qualities. Professional qualification: - An auditor is a professional
accountant. So he must possess certain professional qualifications. Under the Companies Act,
an auditor of a joint stock Company must be a Chartered accountant within the meaning of the
Chartered Accountants Act of 1949. To be a Chartered accountant, he must pass the C.A
examination conducted by the Institute of Chartered Accountants of India. He must also obtain
a certificate from the institute from the Institute of Chartered Accountants of India to take up
public practice of accountancy.
4.1.5.Professional Qualities
To perform his work efficiently, an auditor must possess certain professional qualities. They
are:
1. Knowledge of principles and practice of general accounting.
2. Knowledge of Cost accounting
3. Knowledge of Management accounting
4. Thorough knowledge of techniques of auditing
5. Knowledge of provisions relating to income tax ,wealth tax, GST etc.
6. Knowledge of business laws.
7. Knowledge of economics.
8. Knowledge of Mathematics and Statistics
9. Knowledge of Business Management and Organization and financial administration
10. Knowledge of report writing.
11. Knowledge of the accounts of the business under audit.
12. Attitude, Skills and Knowledge, of technical details of the business under audit.
5|Page

5.E-Audit Process

5.1.What it is?
Electronic auditing, or e-Auditing, is computer-assisted auditing that uses electronic records
to complete all or part of the audit.E-Audit policies and statutes and prepare a basic audit
program to follow

5.1.1.Planning of e-audit- The auditor will review prior audits in your area and professional
literature. The auditor will also research applicable policies and statutes and prepare a basic
audit program to follow.

5.1.2.Notification e-audit- The Office of Internal Audit Services will notify the appropriate
department or department personnel regarding the upcoming audit and its purpose, at which
time an opening meeting will be scheduled.
5.1.3.Opening Meeting e-audit- This meeting will include management and any
administrative personnel involved in the audit. The audit's purpose and objective will be
discussed as well as the audit program. The audit program may be adjusted based on
information obtained during this meeting.
5.1.4.Fieldwork e-audit- This step includes the testing to be performed as well as interviews
with appropriate department personnel.
5.1.5.Report Drafting e-audit- After the fieldwork is completed, a report is drafted. The report
includes such areas as the objective and scope of the audit, relevant background, and the
findings and recommendations for correction or improvement.
5.1.6.Management Response e-audit- A draft audit report will be submitted to the
management of the audited area for their review and responses to the recommendations.
Management responses should include their action plan for correction.

5.1.7.Closing Meeting e-audit- This meeting is held with department management. The audit
report and management responses will be reviewed and discussed. This is the time for questions
and clarifications. Results of other audit procedures not discussed in the final report will be
communicated at this meeting.
5.1.8.Final E-Audit Report Distribution- After the closing meeting, the final audit report
with management responses is distributed to department personnel involved in the audit, the
President, Provost, and Chief Financial Officer, and CWRU’s external accounting firm.

5.1.9.Follow-up e-audit- Approximately six months after the audit report is issued, the Office
of Internal Audit Services will perform a follow-up review. The purpose of this review is to
conclude whether or not the corrective actions were implemented.
5.1.10.Receive vague e-audit assignment- Go audit cash entity wide! Audit Scotland; you
have two weeks. Determine if the state is protecting children placed in its care. Yes, auditors
have started their audits with these vague assignments. As a matter of fact, most audits begin
with vague objectives, but some are more vague than others. An audit is defined as the
6|Page

evaluation of a subject matter against given criteria. Either component (subject matter or
criteria) or both can be fuzzy.

Some auditors have it easier than others because their subject matter and criteria are well
defined. Financial auditors are blessed because their subject matter is well defined. (At least
the whole universe isn’t under examination – only the financial statements of the entire
universe!) The audit subject is the financial statements and the criteria is generally accepted
accounting principles (GAAP). The financial auditor still has plenty of work to do to narrow
the focus of his audit. The financial statements have many components, and the auditor will
not be able to look at all of them. An initial vague audit assignment for a financial audit might
sound like, “Express an opinion on the financial statements of the entity. You could argue that
compliance auditors also have it pretty easy. But a compliance auditor’s job is tougher when
the compliance requirements (or criteria) are lengthy, vague, and require a lot of interpretation.
An initial vague audit assignment for a compliance audit may sound something like,
“Determine whether the entity is in compliance with state regulations and laws.” And state
regulations might consume three volumes of text! The most complex audit type of all is a
performance audit. Because the initial vague assignment may not have any criteria built into it,
the auditor has to diligently hone the objective before being able to begin fieldwork. For
instance, a city auditor may receive the assignment, “Determine whether cell phone usage is
proper.” Or a legislative auditor may be asked to “Audit the effectiveness of the foster care
program.” Eww – these are scary because the criteria is fuzzy. The terms “proper” and
“effective” give me the shivers because they border on a consulting project and are hard to
conclude against. Some audit organizations prefer their auditors to narrow the audit objectives
of their assignments. In other audit organizations, audit managers plan much of the
engagements and narrow the audit objectives before handing over assignments to the auditors.
There is no right way to approach it. Before deciding which areas deserve attention, the auditor
needs to learn more about the client’s operations and systems, and Step 2 does just that.
5.1.11.Gather information about the e-audit subject- The AICPA’s auditing standards are
quite specific about the phase of gathering information. They include a laundry list of all the
questions you should seek to answer about audit subjects before conducting a meaningful risk
assessment. requires that you gain an understanding of the following areas:
Relevant industry, regulatory, and other external factors, including the applicable financial
reporting framework.The nature of the entity, including its operations; its ownership and
governance structures; iii. the types of investments that the entity is making and plans to make,
including investments in entities formed to accomplish specific objectives; and the way that
the entity is structured and how it is financed, to enable the auditor to understand the classes of
transactions, account balances, and disclosures to be expected in the financial statements.The
entity’s selection and application of accounting policies, including the reasons for changes
thereto. The auditor should evaluate whether the entity’s accounting policies are appropriate
for its business and consistent with the applicable financial reporting framework and
accounting policies used in the relevant industry. The entity’s objectives and strategies and
those related business risks that may result in risks of material misstatement. The measurement
and review of the entity’s financial performance.
7|Page

For an auditor, this is actually a very risky part of the audit. This is like the research phase for
a PhD dissertation. We have all met someone who is close to getting their PhD but can’t quite
complete it because she is still researching the topic! Many audits can drag on and on in a
similar fashion.

This is one of the common motivations behind auditors using Same as Last Year (SALY)
procedures. With SALY, there is no research phase and no danger of sucking up precious audit
hours in planning. Using this method, however, causes you to waste precious time in the
fieldwork phase because you will end up performing unnecessary procedures that are not
customized for the audit at hand. SALY won’t tell you what the most effective and quickest
procedure is!After gathering information, many auditors have the tendency to feel a bit
overwhelmed. They have almost too much information with which to work. Now what?

Step 4 takes the chaos – the disorder and disorientation of having too much information – and
concretizes it. The risk assessment phase is a structure that you can use.

5.1.12.Determine e-audit criteria - During the information-gathering phase, you usually

begin to determine your audit criteria. Audit criteria is the benchmark against which you
evaluate the audit subject. An audit without firm criteria is also known as a witch-hunt!
The criteria for a financial audit are very straightforward: they are GAAP (Generally Accepted
Accounting Principles). Financial auditors are to express an opinion on whether the financial
statements comply with the criteria – the benchmarks – or GAAP.

Performance auditors, who let’s say are looking at the safety of foster homes, have to uncover
the criteria as part of their engagement. It isn’t handed to them on a silver platter (or a federally
sponsored website as the case may be).

The performance auditor has to lock down the definition of “safe”? Is it that 90% of the foster
children are safe? Is that the criteria against which the auditor will measure the subject?

These questions open up a whole can of worms, and it is VERY important that the auditor and
the client agree on the definition of “safe” before proceeding with the audit. Otherwise, the
auditor may report at the end of the engagement, “You have failed because only 72% of your
children are safe.” Then the client might say something like, “Hold on, we define safety
differently than you do, and from our calculations, 97% of our children are safe.”

The Single Audit (the audit of federal grant funds) has three main subject matters – the financial
statements, internal controls, and the grant program – and three sets of criteria – GAAP, the
Green Book, and the twelve federal compliance requirements laid out in the compliance
supplement, respectively.

5.1.13.Break the Universe into Pieces of e- audit- In order to approach an audit effectively,
you must break down the audit universe into manageable chunks. Instead of saying that you
will examine the whole earth, you will look at just the continent of Europe. Even more
8|Page

specifically, you will examine just Italy. Still, more specifically, you will look at just one city
in Italy – Florence. But Florence is still too big of an audit subject. I can’t think of a way to
audit Italy or Florence because the subject is too broad (but I would love it if someone would
pay me to hang out there for a year trying). You can’t assess risk on Florence. Now what is
G.R.E.A.T. about the risk assessment SASs is that they divide financial statement universe up
into bite sized chunks for you—the chunks are the elements of the financial statements and the
related management assertions. Other standard setting bodies, such as the GAO (Yellow Book)
and the Institute of Internal Auditors, don’t give us much help. We are left to our own devices.
And believe me, some auditors are more than qualified to create some wacky devices. So on a
performance audit or a compliance audit, you must come up with your own way to divide the
universe into bite-sized pieces. This can be one of the more challenging phases of the audit.
Simple example: on a compliance engagement, the chunks of the audit universe might be the
30 compliance requirements for the grant.
5.1.14.Refine the e-audit objective Now it is time to refine that vague audit assignment so
that you can work with it. The audit universe has, up until this point, been too broad, too
universal. “Express an opinion on the financial statements?” “Verify compliance with grant
requirements?” Those include an awful lot of information and detail that you are not going to
be able to verify. But now that you know where the risks are, you can narrow your focus. For
instance, for our financial statement audit you may decide that cash receipts deserve some
attention. You might even state the objective in terms of the management assertions.
5.2.The Auditor’s Response – also known as Detection Risk
Detection risk is a fancy term for “auditor response.” It is the only part of the risk assessment
process over which the auditor has control. The inherent risk and the control risk are in the
auditee’s hands, and once the auditor knows what the client is up to, the auditor has to decide
how to respond to what the client is doing.
Auditor responses can range from dropping an issue completely to auditing the heck out of it
by running several different in-depth tests.
The AICPA’s AU-Cs are the only standards that define the term ‘detection risk’ and identify
ways that financial auditors can improve the effectiveness, selection, and application of
appropriate audit procedures and the interpretation of the audit results.
A46 For a given level of audit risk, the acceptable level of detection risk bears an inverse
relationship to the assessed risks. For example, the greater the risks of material misstatement
the auditor believes exists, the less the detection risk that can be accepted and, accordingly, the
more persuasive the audit evidence required by the auditor.
A47 Detection risk relates to the nature, timing, and extent of the auditor’s procedures that
are determined by the auditor to reduce audit risk to an acceptably low level. It is therefore a
function of the effectiveness of an audit procedure and of its application by the auditor.
9|Page

6.Bangladesh E-Audit Process

Auditing a systematic process of objectively obtaining and evaluating evidence regarding

assertions about economic actions and events to ascertain the degree of correspondence
between these assertions and established criteria. It is an independent examination of financial
statements or related financial information of an entity. The results of the examination are
finally expressed in the form of a specific opinion communicated to the relevant parties.
Auditing of financial statements of companies registered under the companies act 1994 is
compulsory in Bangladesh. According to Sec 213(3), the auditor is to make a report to be
presented in the annual general meeting of the company on accounts examined by him.
Before acceptance of the International Standards of Auditing (ISA) by the Institute of Chartered
Accountants of Bangladesh (ICAB), detection of errors and frauds, and prevention of errors
and frauds were the two important objectives of auditing in Bangladesh. At present, Bangladesh
follows ISA guidelines in auditing. Auditing practices are regulated by the Companies Act
1994, the Banking Companies Act 1991, the Insurance Act 1938, the Securities and Exchange
Commission Act 1993, the Securities and Exchange Rules 1987, the Foreign Donations
Regulation Rules 1978, and the Co-operative Societies Ordinance 1984.
According to the Companies Act 1994, accounts of companies registered under this act must
be audited by chartered accountants within the regulations of the Bangladesh Chartered
Accountants Order 1973. Similarly, all books of accounts maintained by a non-government
organization receiving foreign donations shall be audited by a chartered accountant as defined
in the same Order. The accounts of every co-operative society are to be audited at least once in
every co-operative year. The audit is to be conducted by the Registrar, or by an audit officer
authorized by him, and by such date as may be prescribed. Accounts of enterprises under sector
corporations are audited at three levels - corporations internal audit departments, independent
professional audit firms, and the Comptroller and Auditor General (C&AG) of Bangladesh.
The employees of a corporation on special issues conduct internal audit, sometimes similar to
an investigation, and often termed as management audit. The purpose of this audit is to check
whether the corporation's rules and regulations are being properly followed at the time of
execution of any policy. Chartered accountants to pass opinion about the financial statements
annually conduct independent professional audit. The C&AG has the obligation to conduct a
government commercial audit where there is any government interest in the form of ownership,
or investments, or where the government provides help in the form of subsidies. Mission Audit
Directorate DG Mission audit directorate conducts audit in Bangladesh Embassies/High
Commissions, Trade Commissions, nationalized banks and Biman offices abroad. Former
office of the Directorate of Mission and UN Audit was transformed to the office of the
Directorate of Mission Audit when Bangladesh ceased to be a member of the UN Board of
Auditors in 1984. Prior to the creation of the Directorate of Mission and UN Audit in 1978, the
audit function of Bangladesh Diplomatic Missions, the office of the C&AG administered Trade
offices, and nationalized enterprises. The main responsibilities of the Mission Audit Directorate
are to prepare a budget for the audit programs; form audit parties based on an audit plan;
provide necessary support to the members of the audit team to travel; audit the accounts of the
10 | P a g e

CAO, Ministry of Foreign Affairs; pursue audit reports with the concerned departments; and
prepare the annual audit report, etc.
Performance Audit Directorate' Performance Audit Directorate was established in October
2005. Performance Audit is an independent evaluation of the economy, efficiency and
effectiveness with which the audited entity uses its resources. The office of the C&AG in
addition to Financial and Compliance Audits for ensuring better accountability introduces
performance Audit. The main responsibility assigned to the Performance Audit Directorate is
the enhancement of performance audit capability by:
1.Providing advice to other audit directorates
2.Supervising performance audit works of other audit directorates
3.Conducting performance audit
4.Working as research wing of the office of the C&AG for improving audit methodology
5.Developing training modules and deliver training
6.Developing quality checklists.
Financial Management Academy (FIMA) The office of the DG Financial Management
Academy was established to impart training to officers and staff of the Audit and Accounts
Department. The academy was set up in 1962 as Audit and Accounts Training Centre to offer
training to the employees. After the liberation of Bangladesh, it was upgraded and renamed as
the Audit and Accounts Training Academy and was headed by a Director General. In
September 1997, the academy was renamed as the Financial Management Academy and was
made the core Centre for providing financial management training to participants from
government ministries/ departments although imparting training to officers and staff of the
Audit and Accounts Department continued to remain its main business.
Auditing types, systems and procedures Three main types of audit are the regularity or
compliance audit, financial statements audit and performance audit (value for money audit).
The regularity audit is very traditional and it examines receipts and expenditures and the
financial systems and transactions of the audited organization to see whether it has complied
with relevant rules, regulations, laws, procedures, orders etc. A financial statement audit is the
examination of the financial statements of an audited body to express an opinion on whether
they truly present the expenditures and receipts in the case of the accounts prepared. It includes
the audit of the appropriation and finance accounts of the government and of the government
owned commercial enterprises. The performance audits examine an organization’s programs,
activities, functions or management systems and procedures to assess whether the organization
has achieved economy, efficiency, and effectiveness in the utilization of its resources.
Bangladesh recently adopted programs to conduct performance audits on different issues in
some organizations. Serious financial irregularities along with audit comments are
incorporated in the Annual Audit Report, after the C&AG has approved them. The Audit
Report is then submitted to the President of the Republic by the C&AG to be laid before
Parliament. The reports placed before the Public Accounts Committee (PAC) discusses the
11 | P a g e

Parliament. A standing committee of Parliament called the Public Undertaking Committee,

(PUC) pursuant to the rule 238 of the 'Rules of Procedure of Parliament', attends to audit reports
of the C&AG relating to efficiency and effectiveness of commercially run government
organizations.

7.World E-Audit Process

An audit is an independent audit of the accuracy and fairness of accounting, accounting and
financial statements of economic entities engaged in the production and sale of goods, services,
and work. In some countries, an audit involves examining an entity and commenting on its
financial statements. In our world, which is on the threshold of the 4th Industrial Revolution,
as a result of the rapid development of technology, the electrification of the accounting and
auditing process is one of the factors. The State Tax Service (former Ministry of Taxes) has
been implementing the Automated Tax Information System in Azerbaijan for more than 10
years. The transition to e-audit will develop not only the field of accounting but also some
sectors. As we know, electronic audit or other electronic sectors are more likely to be
threatened by hackers, which is very important. To prevent this, more attention should be paid
to the information technology sector. This, in turn, will lead to the solution of several problems.
First of all, students studying in the field of information technology or additional education
courses will start to provide better quality education, which will affect the overall welfare and
living standards, increase the quality of education. We created a social survey using Google
docs. The social survey remained active on the Internet for 30 days. As a result, we concluded
that the public and the public can be better informed about this. For example, seminars and
discussions can be organized, as well as information and articles about the pros and cons of e-
audit; E-audit is currently a growing and globalizing system in countries. The transition to e-
audit will increase transparency and, I think, will save companies costs. Keywords: electronic
audit, e-audit, behavioral accounting, accounting. With globalization accounting rules have
become a common problem in every country, and to address this problem, the International
Accounting Standards Committee has adopted International Accounting Standards and
International Financial Accounting Standards that can be accepted and understood by the whole
world. The Republic of Azerbaijan gained its independence in 1991 and in the first years of
independence Azerbaijan traditionally continued the rules and principles of accounting
inherited from the former Soviet system. has done. However, it adopted a law on amendments
and additions to the “Law on Accounting” dated May 6, 2018, which states that the Accounting
System in commercial organizations in the territory of the Republic of Azerbaijan should be
established only on the basis of International audit.
Financial Reporting Standards. Electronic audit consists of the following stages:
• Identification of the business entity to be audited;
• Electronic audit planning and evidence collection process;
• Documentation and finalization of electronic audit results;
• Informing the business entity about the results of the electronic audit.
12 | P a g e

Each business entity, depending on its specific characteristics and areas of activity, must have
the following electronic documents in the organization of accounting in order to carry out its
electronic audit process:
• Statement of financial position, general ledger and balance of separate accounts;
• Profit (income) and loss statement;
• Cash flow statement;
• Statement of changes in equity;
• Accounting policy and explanatory notes;
• Electronic invoices, electronic tax invoices, payment orders, etc .;
• Schedule of sales operations (with disclosure of buyers);
• Schedule of purchase operations (with information on sellers);
• Schedule of banking operations (with disclosure of bank account turnovers and balances by
months);
• Warehouse turnover schedule (with disclosure of inventories at the beginning and end of
each month);
• Cash flow schedule (with disclosure of monthly cash flows and payments);
• Salary calculation and payment schedules of employees;
• Schedule of long-term asset movements
Information table on debtors and creditors;
• And other necessary documents.
It should be noted that the problems related to e-audit and e-audit have been little studied in
the scientific literature. According to research by Brandon and others, "Each service is
evaluated on the basis of three criteria that are important for behavioral accounting researchers:
cost, flexibility, and access to interest groups." (Brandon, D.M., Long, J.H., Loraas, T.M.,
Mueller-Phillips, J. and Vansant, B., 2013.). We partially agree that, in fact, people's behavior
does not pass unnoticed in an entity's accounting. Another study notes that the behavioral
accounting research literature provides a framework that can be viewed as a whole, rather than
in segments such as accounting subsections or research methods. The framework classifies
BARs according to the focus of the study: individual, group, organization, or society in which
accounting is available. (Birnberg, J.G., 2011.) As noted in this study, it is more appropriate to
divide into 4 groups. Recommendations were made to increase the effectiveness of financial
decisions, the limits of opportunities for psychological influence in making financial decisions
within the authority, rights and responsibilities of the organization were identified. (Nuriyev,
N. and Azizov, A., 2019.). The regulatory framework of existing audit standards and actual
practices are validated through interviews and then synthesized to create evidence-based notes
13 | P a g e

on the appropriateness of the methodology used. (Guliyev, V., Hajiyev, N. and Guliyev, F.,
2019.). He showed that the new realities of the XXI century have changed the attitude to
traditional auditing, which requires the justification of the effect of work on the application of
new information systems and the modernization of old systems, the complex automation of
work processes. specialized solutions. Nevertheless, the demand for the development of
business and IT strategies and feasibility studies is constantly growing. Projects related to the
application of corporate knowledge come to the fore at all levels of government. (Lyudmila,
K., Alexey, S. and Sevinj, A., 2019.). Estimating capacity. The information uncovered over the
span of review help fabricate grounded estimates for the potential changes in the separate
organization's key market pointers sooner rather than later. Subsequently, organizations get a
chance to make alterations to their arranged pointers, and the strategies executed available for
contacting them (Pickett, 2006, pp. 14-19). The office size has significantly positive relations
with both audit quality and audit fees, even after controlling for national-level audit firm size
and office-level industry expertise. These positive relations support the view that large local
offices provide higher-quality audits compared with small local offices, and that such quality
differences are priced in the market for audit services. (Choi, J.H., Kim, C., Kim, J.B. and Zang,
Y.

8.E-Auditing vs Traditional Audit

8.1.Traditional Audit
The major characters of the tradition audit are all information what is needed by auditors are
on the paper and the manual calculators and without high communication technology. Auditors
usually were limited by the place in the paper time. When a several people are working on the
same auditing project for a client with offices in cities across the country, even worldwide, it
takes a lots all time those auditors get the information which they need from the client, even
there is risk paper information disappear for many reasons. on the another hand, mail paper
information increase the auditing cost. The mistake caused by the manual calculators
inevitably, no matter how fixed auditors concentrate on recalculate is, after all auditors are
human. The global business become major in the modern business world, some example,
several auditors who are in different locations are working a same auditing project, or auditors
are in different city even country with the client, when there is issue among these auditors or
between auditors and client, they only can communicate with each other by phone or be
together and have meeting. Phone call can not make sure information been watched in the same
time when the voice is talking about the issue, but having a meeting takes time and money .
No matter auditors work with technology or not, the most important thing in process of auditing
is evidence. The basic framework for the auditor understands of evidence and its use to support
the auditor's opinion on the financial statement. In reaching an opinion on the financial
statements, the evidence gathered from the audit procedure is used to determine the fairness of
the financial statements and the type of audit report to be issued.
14 | P a g e

8.2.E-Auditing
Electronic auditing, or e-auditing, is computer-assisted auditing that uses electronic records to
complete part or all of your audit. This follows similar procedures as a traditional audit but
using electronic means to remotely perform the audit. E-auditing is also known as Remote
Auditing. For any number of reasons, having an assessor physically inside your walls for an
assessment can prove needless with certain types of audits. Of course, it’s preferable, if not
mandatory, depending on the nature of the audit, but we’re also moving into a period of time
where technology has enabled new types of audits that often don’t require their presence.
An e-audit is a systematic, independent, and documented process to obtain evidence through
electronic means to determine the extent of conformity to the audit criteria. The use of e-
auditing is increasing because so much of the technology we use in our daily lives connecting
with friends on Skype, finding jobs through LinkedIn, or attending online classes is done over
the Internet. These activities become a gateway to enhancing and applying online
communication techniques. The more familiar we become with technology, the less anxious
we feel about its interactive uses.

9.Advantages and Disadvantages of E-Auditing

9.1.Advantages of E-Auditing
1.The major advantage of auditing is that It gives assurance to the owners, investors, etc. about
the accuracy of their financial statements.
2.During the auditing process, errors and frauds in the account books are discovered. In a way,
it also prevents such errors for the fear of being detected.
3.In the case of external audits, the books are very closely inspected, and the management gets
a second opinion of their financial standing.
4.Since the books are closely examined, it helps the employees to be honest and responsible
while preparing the reports.
5.Utilizes the computer as a tool for performing auditing functions.
6.Forces the auditor to get more involved in the system, there by increasing his ability to
perform more complex audit.
7.Test results are readily identifiable and can be used as measures of internal processing
reliability
8.Increases service to clients because controls and operations are checked by the auditor
9.Provide effective test processing logic and program controls.
The financial statements get more credibility while they are audited.
15 | P a g e

9.2.Disadvantages of E-Auditing
1.Auditing involves a deep examination of records, which ends up in extra cost to the company.
2.The reports of the audit act as evidence to make major changes in the accounts of the
distribution of profits.
3.The changes are calibrated and it makes the employees feel harassed
4.Since the rules and regulations of business vary from time to time, it affects the result of the
audit.
5.Since the audit report is credentialed, there are chances for the companies to commit fraud
and ultimately it will force the auditors to commit crimes after the audit.
6.Smaller concerns do not consider auditing that important and proceed with regular
transactions.
7.The auditing report is prepared based on the information agreed by the clients and so it is not
guaranteed.
8.Requires more computer time.
9.It is very expensive.
10.It requires extensive knowledge of computer and data processing by the auditor.

10.Basic Principles Governing an E-Audit

This Auditing and Assurance Standard was the standard on auditing that was first issued by the
Institute. It explains the basics of auditing that govern the professional responsibilities of an
auditor.
The basic principles of auditing are confidentiality, integrity, objectivity, independence, skills
and competence, work performed by others, documentation, planning, audit evidence,
accounting system and internal control, and audit reporting.
10.1.Thorough examination of all systems
The assessment of all systems and procedures related to accounting and financial operations is
the primary goal of any audit. Before beginning the audit of the final statements of accounts,
the auditor must first comprehend the system and its functionality. It will serve as the
foundation for the entire auditing process.
10.2.Internal Controls Assessment
The extent of the audit will be determined by the efficacy of the organization's internal control
system. The auditor can rely on the system if the company's internal controls are in place and
very effective. Then he won't have to go over the accounting in great detail.
16 | P a g e

If the internal controls, on the other hand, are ineffective, the auditor must go over the accounts
with a fine-tooth comb. The auditor must also assess the internal control system, according to
CARO 2003.
10.3.Arithmetic Precision
The auditor must also check the accuracy of the books of accounts regularly. This includes
double-checking the books' arithmetical accuracy and verifying that the entries are properly
posted.
10.4.Principles of Accounting
The auditor must check that the capital and income transactions are properly distinguished. All
financial transactions must fall into one of two categories: revenue or capital. The auditor must
also verify the accuracy of both income and expenditure items
10.5Assets Verification
All of the company's assets must be physically verified by the auditor. As a result, he must
examine all legal documents, certifications, official statements, and other documents to
determine the ownership of all assets. The auditor must also make certain that no assets are
missing from the balance sheet.
10.6.Liabilities Verification
The auditor must also verify the organization's liabilities. He'll go over all of the documents,
letters, and certificates once again. He can also seek confirmation from outside parties if
necessary.
10.7Attestation
A paper trail is left behind by every financial transaction. These supporting documentation
must be examined by the auditor to ensure that the transactions are valid and accurate.
Vouching is the term for this. The organization, for example, has a 12,000/- electrical expense.
The auditor must then examine the electrical bill to double-check the transaction
10.8.Statutory Obligations
The auditor's job is to ensure that the company's financial records conform with all laws, rules,
and regulations in effect at the moment. As a result, he must ensure that the accounts are
compliant with the Companies Act 2003, the Income Tax Act 1961, and other relevant laws.
17 | P a g e

11.Challenges implementing E-Audit

11.1.Different Filling Requirement

The Internal Revenue Service and other government agencies may have different rules for
electronic record keeping than for paper record keeping. Business owners should find out how
to store audit reports and for how long they must store them prior to agreeing to an electronic
audit. In addition, although electronic audits are often called “paperless,” some paperwork may
need to be printed to fulfill government record-keeping rules
11.2.Requires Technology
Auditors must be comfortable using computer software to create audit reports. If an auditor is
not familiar with computers or with the software he is expected to use, he may have a steep
learning curve. Auditors also must be familiar with using email or websites and uploading
attachments, while business owners must be able to retrieve audit reports from their email or
by going to a website
11.3.Changing Over Systems
f a business relied on paper audits before, it has to switch over to an electronic system before
it can begin taking advantage of paperless audits. This may take weeks or months, depending
on how computer-based the business was before it switched over. In addition, some personnel
may require training to access or use the new system. Thus, it can take a year or more for a
business to switch over to a paperless system.
11.4.Security Considerations
If an auditor is going to use computers or other technology to prepare an audit, she must
consider security factors that auditors who create paper reports don’t have to consider. Audits
often refer to sensitive information, such as a business’ finances or tax requirments. Auditors
must be able to send this information securely. Only employees of the company who need to
know the information in the report should be able to access audit reports online or via mail.
18 | P a g e

12.Conclusion

Instruct people and businesses on the transition to e-audit and educate them about the process.
For example, seminars and discussions can be organized, as well as information and articles
about the pros and cons of e-auditing in the business world. There is a need to include e-
accounting and e-audit in the curricula of educational institutions. The transition of internal
audit to e-audit can further increase transparency for enterprises. It is necessary to completely
computerize the accounting system to allow access to internal primary documents in the e-
audit. E-audit is currently a growing and globalizing system in countries. The transition to e-
audit will increase transparency and, I think, companies will be able to save costs. Legislation
in the field of cyber security in the transition to e-audit and electronic in general should be
improved. Considering the complexity of today’s businesses, there is a need for the auditor
who is an accountant to specialize in more specific areas such that Electronic Data Processing
Audit becomes a special field and the auditor becomes an expert in this field. The auditor hence
not only qualifies as a professional accountant but also as a computer expert. If the auditor is a
computer expert, it would become much easier to unravel fraudulent acts by computer
operators in an EDP environment as the auditor would be able to reach areas previously limited
by his technical knowledge. In extreme cases where the auditor faces limitation due to his
technical knowledge, it is important that a computer expert be engaged alongside the auditor
as the use of this expert would be essential for the auditor to form an opinion.