The Impact Of Using Computer Technology and

Information Technology On Audit and Accounting System

ABSTRACT

Rely on the work that being done by using computer technology is a describe of business today.
Computer technology or Information technology (IT) used not only by large firms, but also used
by small firms. The advance in IT has made firms change the methods on how gather and report
information, it means from paper-based media change to mostly electronic-based media. Many
studies show that using computer or information technology has positive impacts to firms. Some
of the benefits are increase the quality of information to reduce the uncertainty, decrease the
complexity faced, lowering transaction costs, etcetera. Studies show that, computer technology
can efficient if its internal control managed well. Meanwhile, using computer technology also
can ineffective for firms, because technology has risks that must be aware by users. This
research wants to know further the benefit and risk by using computer and information
technology in cost perspective. It means that when benefits got bigger than risks, we can assume
cost used effectively or efficient for firms, else is just the opposite. This paper focuses on how
computer technology and information technology has impact on audit cost and accounting
system cost.

Keywords : Information technology, computer technology, cost

2. LITERATURE REVIEW

2.1. Transaction Costs

Transaction costs are generally defined as the costs of gathering information, evaluating
alternative options, negotiating, contracting, and the physical transaction of the object. These
cost are consequences of complexity and the uncertainty of the economic systems (Antonio
Ordella, 2011). Uncertainty and complexity can either be related to human behavior or
environmental and unpredictable events. They both are the outcome of an equal distribution of
information between the actors involved in the transactions. Different economic systems are thus
defined on the basis of their efficiency in managing this uncertainty. This efficiency is measured
in terms of transaction costs. Furtherer, in Coase 1937; Williamson 1975; Ouchi 1980, said that
the new institutional economics argues that different forms of economic organizations like
market, hierarchies and clans are consequence of transaction costs.

2.2. Transaction Costs and Information Technology

Ciborra (op.cit), Malone et al. (op.cit) and Picot et al (1997) argue that information technology
can be used to reduce transaction costs in different economics organization. This argument is
based on the idea of using information technology to make more information available to
decision makers, thus contributing to reduction of uncertainty (Antonio Ordella, 2011).

2.3. Auditing

Audit is a systematic, independent and documented process for obtaining audit evidence
(records, statements of fact or other information which are relevant and verifiable) and
evaluating it objectively to determine the extent to which the audit criteria (set of policies,
procedures or requirements) are fulfilled (ISO, 2011)

American Accounting Association defined auditing as : a systemic process of objectively

obtained and evaluating evidence regarding assertions about economic actions and events to
ascertain the degree of correspondence between those assertions and established area criteria and
communicating the results to interested users.
2.3.1. Computer assisted Audit Techniques

Cerullo and Cerullo (2003) defined three broad categories of computer assisted techniques to
test controls:

1. Auditing around the computer

With this technique, auditors test the realiablity of computer generated information by
first calculating expected results from the transactions entered into the system. Then, the
auditor compare these calculations to the processing or output results. If they prove to be
accurate and valid, it is assumed that the system of controls is effective and that the
system is operating properly.
2. Auditing with the computer
The auditing with the computer approach embraces a variety of techniques and often is
referred to as computer-assisted audit techniques (CAATs). CAATs involve using
computer, often a microcomputer, to aid auditors. Although the utilization of CAATs has
radically improved the capabilities and effectiveness of auditors, they are primarily used
to perform substantive test. One widely used CAATs, known as general audit software
(GAS), is frequently employed to perform substantive test and may be used for limited
testing of controls. For example, GAS can be used to test the functioning of algorithms in
computer programs, but it requires extensive experience in using the software. In
contrast, the auditing through the computer techniques are designed specifically to test
automated controls, and some techniques do not require extensive IT experience.
3. Auditing through the computer
These techniques focus on testing automated processing steps, programming logic, edit
routines and programmed controls. The approach assumes that if the processing program
are soundly developed and incorporate adequate edit routines and programmed checks,
then errors and irregularities are not likely to slip to slip by undetected. If these programs
are functioning as designed, the output can reasonably be accepted as reliable.
2.4. Prior Researchs

Prior research ever studied by Mary Calahan Hill and W. Alan Barness (2011) in End-User
Computing Applications, Implications for Internal Auditors and Managers. Their research
method used qualitative method. This research show that Corporates used information
technology to meet company operational or management information needs. However, using
information technology, the corporate must anticipate risks. There are 4 risks:

1. Risk that the end user application will have unintentional errors that that result in poor
decision making or inaccurate financial reporting.
2. Risk that scarce resources (money or employee time) will be waste on developing these
applications.
3. End user application will be used to perpetuate fraud or hide losses.
4. End user application increase the risk of data breaches

In order to increase the benefits and decrease the risks of using information technology, Mary
and Alan on their research gave some suggests to corporate in areas: control, policy,
communication, training, examining end user applications, and finally controlling risk.

The older prior research ever studied by Antonio Ordella (2001) in Does Information
Technology Always Lead To Lower Transaction Costs?. The paper show that IT has
ambivalent effects on the overall transaction cost. This analyzed is based on the idea that IT
externalities have both positive and negative effects on coordination and thus transaction costs.
Two different strategies to use IT in an organizational setting are identified: one to increase the
amount of information available to decision makers thus to reduce the uncertainty and hence
transaction cost. The other to reduce the amount of available information to decrease the
complexity faced and thus coordination and transaction costs. Finally, the effects of IT
externalities impose the awareness that one strategy is not a substitute to the other rather that
they can both coexist.

Ni Luh (2007) designed the system Information computer at construction company, in this study
Ni Luh (2007), discovered there is a weakness in the system the old task both from the input
side, procedures and output For this Ni Luh system or mendasain system new information by
using MYOB program. Accounting information system with using the MYOB program can
eliminate that weakness. Hastoni and Aprilisibeth (2008) From the results of this study found
some weaknesses in the system causing internal controls frequent inner error
recording receivables.
Of the many functions of AIS there are 3 main functions that are formed AIS on the company
other than use for decision-making is also composed from, collect and store transaction date,
process the date into information that can, as well as do control over company assets.
Benefits of research expected benefits from this research for the company is
as follows :
1. as close as the information precise and accurate the main business activities can be done
effectively andefficient.
2. Improve quality and reduction of production costs
3. Improve efficiency.
4. Improve ability in making decisions
5. Increase knowledge.
2) Formulation of Case Issues
Problems that become weaknesses UD. Practical is the sales system goods that often cause
problems, recording of prices and codes goods are manual, so the officer should always look at
goods code data and price (in a piece of paper / note) then record it into a notesales manually and
writing one by one type and price of goods.The action is less efficient and effective because error
can occur in the calculation of total sales price as well as incompatible record keeping quantity of
goods at the time of booking. This is supported by management Inadequate documents especially
document formats, use of crops,and document archiving. Other than that, UD.Praktis billing
accounting procedures also has constraints in terms of collect receivables expired. UD.Practical
notessales orders and receivables in sales receipts and receivable cards.Often there is deep delays
collect receivables to customers who already due, due to partnew financial viewing data
receivable every end is clear about authority and responsibilities, so that employees can work in
activities many things (concurrent / taskside).
3.1 RESEARCH METHOD
Research method on this paper is qualitative method or qualitative research. Methods of
qualitative research is to accumulate some literature review to be analyzed and interpreted to get
some conclusions about research on this paper.

4.RESULTS

The digital world phenomenon, on the one hand, offers tremendous benefits, but on the other, it
also creates significant and unprecedented risks. Here are some benefits of using
computer/information technology:

1. Economic efficiencies
IT resources can significantly reduce accounting cost. Redundant task can be centralized
in one location through the use of IT structure
2. Improved equipments
The presence of computer, printers, scanners, faxes or other innovative equipment in
office creates a competitive advantages compared to those who dont have these things.
3. Graphic software
IT software creates photos, graphs and chartsfrom data input in order to facilitate better
understanding of the topic. This is usually used in financial reporting.
4. Internet
The internet provides vast sources of information that can be used by business, especially
in accounting area.
5. Cloud
Web hosting off-site or called as cloud is the latest trend with accounting applications.
Instead of installing a program onto the entitys computer and saving data there, the
program resides on a server in a different location
6. Speed
Through the integration of IT, multiple calculations can be done in a second, resulting in
the speeding up of the information generation of the system.
7. Reduction of paper usage
 The utilization of electronic envelops and documents reduce the usage of papers in
accounting processes. Thus, it reduces costs and of course it draws the entity away from
the environmental issues regarding trees and paper usage, etcetera.

Here are some risks of using computer/information technology:

1. Security risks, represent the unauthorized access to information: data leakage, data
privacy, fraud and endpoint security. The security risks include also broad external risks,
such as viruses, laptop theft/fraud, disaster, etcetera.
2. Information system misuse
Study made in Romania at Valahia University of Targoviste in 2008, showed a high
intentionality of IS misuse. Regarding the motivation of misuse are: curiosity, intellectual
challenge, personal gain without the intention to hurt someone, personal gain being aware
of the negative consequences on others or on company and to intentionally harm others or
the company, etcetera.
5. CONCLUSION
We believe that by using computer/information technology, the benefits are greater than
the costs for the firms. Computer and information technology advancements have greatly
helped the accounting systems of business entities and audit for auditors. Many
transactions processed were simplified thus creating efficient operations. However, we
must consider the possibility that the system might be ineffective sometimes, same with
some accounting software. Business entities must choose compatible systems and
software for them to be effective. Business entities also must be aware of potential risks
using computer and information technology. We also believe that even in time flows
made technology become more and more sophisticated than before,
computer/information technology cant replace the role of man in the accounting systems.
 Referrences

1. Cerullo, V.M. and M.J. Cerullo, Impact of SAS No. 94 on computer audit techniques, IS
Control J.,1, 5357, 2003.
2. Hill, Mary Callahan, and W. Alan Barnes. "End-User Computing Applications." The
CPA Journal 81.7 (2011): 67-71.
3. Lim, Francis Pol C. Impact of Information Technology on Accounting Systems. The
Asia Pacific Journal Vol.3, No.2, December (2013), pp. 93-106
4. Cordella, Antonio. Does Information Technology Always Lead To Lower Transaction
Costs?. The 9th European Conference on Information Systems. Bled, Slovenia, June 27-
29, 2001
5. Suduc, Ana Maria., Mihai Bizoi. And Florin Gheorge Filip, Audit for Information
Systems Security, Informatica Economica vol. 14, no. 1/2010
6. ISO 19011:2011Guidelines for auditing management systems