ISA 315: IT Risks in Financial Audits

The module is based on ISA 315, centering on understanding a client's IT use within an information systems audit.
It addresses identifying risks from IT use and specific IT applications subject to these risks.
Emphasizes the auditor's role in identifying and evaluating controls, and understanding information flow related to financial transactions.
Aims to guide auditors in assessing how IT impacts financial reporting and internal controls across different IT complexity levels.
Provides a framework for identifying and addressing potential IT-related risks affecting financial statement accuracy and reliability.

Design an audit strategy for risks from IT use in financial reporting, balancing general IT controls, application controls, and substantive procedures.
This aims to determine if the planned audit approach provides a reasonable basis for forming an opinion on financial statements
Students are expected to analyze the IT environment, evaluate controls design/implementation, and synthesize an appropriate audit strategy.
The auditor's understanding of the client's IT environment, the impact of IT on internal controls, and the importance of general IT controls in addressing risks arising from the use of IT.
Students are required to grasp the significance of understanding information flows in an entity's system to identify risks of material misstatement.
Auditors need to know the policies that define how information flows, including transactions, and other aspects of the entity's information processing activities relevant to preparing financial statements.
IT enhances controls through consistent rules, improved timeliness/accuracy, and better monitoring.
Auditors need to consider the above factors when planning and executing an audit, including identifying IT applications subject to risks, determining related risks, and identifying general IT controls.

Understanding IT and its internal controls impact is crucial for financial statement audits in today's business environment.
Auditors must identify IT applications subject to risks, understand general IT controls, and assess potential for unauthorized access or program changes.
It also includes considering emerging technologies impact and integrated IT environments complexities on financial reporting.
Proactive approach to IT risks is important for financial statement audits to make stakeholders have confidence in the accuracy and transparency of financial information.

The audit scope remains consistent whether processes are manual, automated, or hybrid.
Auditors should understand information systems, communication, and controls in the control activities component to identify risks of material misstatement.
Understanding the information system helps identify and assess risks at the assertion level (Transaction, Account Balance, Financial Report).
Auditors' understanding should involve policies defining information flows related to significant transactions and account balances.
Auditors need to identify and assess specific controls within the control activities component.
IT significantly changes information processing and communication, which requires auditors to understand the IT environment relevant to information systems.
Automated controls can be more reliable because they cannot be as easily bypassed or ignored

IT environments vary from simple commercial software to complex ERP systems.
Auditors need to tailor their approach based on IT's complexity.
They must assess controls effectively, evaluate financial data integrity, and design appropriate audit procedures to mitigate risks of material misstatement.
Complex IT environments may integrate with other IT applications in business operations and use internal/external service providers.

These risks include ineffective information processing controls and threats to information integrity.
Examples are inappropriate reliance on inaccurate IT applications and unauthorized data access.
Specific risks involve unauthorized access to data, changes to master files, and potential data loss.
Greater IT complexity requires team members with specialized skills to identify applications, determine risks, and identify general IT controls.
Auditors are required to evaluate effectively designed controls, determine whether the controls have been implemented, and should consider what controls the auditor may rely on.

This involves understanding IT processes and general IT controls nature and complexity
Auditors should also identify related risks from IT use and the entity's general IT controls
Emerging technologies include blockchain, robotics and AI and their ability to increase efficiency or enhance financial reporting.
Auditors should identify how IT impacts the design and implementation of internal control systems.
It's essential to recognize the systems can be manual, automated, or a mixture, and understanding information flows is vital for assessment, enhance controls but can introduce inaccuracies.
In the context of an audit, understanding policies that define information flow related to significant transactions is useful, including the complexity and potential impacts to the audit process
Ineffective general IT controls impact the auditor's decision to rely on automated controls withing and IT application

Responsibilities based on ISA 315 include identifying the key controls in control activities.
The auditor should also be able to evaluate the design and implementation of the implemented controls
Other responsibilities are to identify the IT impacts on the risks arising from the use of IT, identifying the general IT controls, evaluating the designs and determining whether the controls are implemented.