Page 90 - CA Inter Audit PARAM

CA Ravi Taori

QNO Automated Environments (Meaning and Key Features)- Old Course -- (M19R/N20R)
AAE.01 Bhaskar CNO- AAE.020
Explain the meaning of automated environment. Also discuss the key features of an automated
environment.
OR
With the increasing adoption of information technology, business today relies on software systems and

applications more than ever. Many of these IT systems generate and process data that is used in the
preparation of financial statements of a company. The auditors also often rely on the data and reports
that are generated from these systems. Explain stating clearly the meaning of Automated environment
with example.
Answer ➢ Definition
An automated environment basically refers to a business environment where the
• Processes, (Purchase Process, Production Process, Sales Process)
• Operations or Procedures (Raising PRN, Selecting Quotation, Placing Purchase Order,
Receiving Goods, Storage)
• Accounting and (Purchase Book, Creditor’s Ledger, Credit or Debit Notes, Periodical
Reconciliation)
• Even Decisions (Re-Order Level / Order Size / Frequency etc.) are carried out by using
computer systems – also known as Information Systems (IS) or Information Technology (IT)
systems. Nowadays, it is very common to see computer systems being used in almost every
type of business.

➢ Example to further support above definition
Think about how banking transactions are carried out using ATMs (Automated Teller Machines), or
how tickets can be purchased using “apps” on mobile phones, etc. In these examples, you can see
how these computer systems enable us to transact business at any time and any day.

➢ Key features / Fundamental Principles of an Automated Environment
Some of the key features of an automated environment are as follows:
The fundamental principle of an automated environment is the ability to carry out business with less
manual intervention and more system driven. The complexity of a business environment depends on
the level of automation i.e., if a business environment is more automated, it is likely to be more
complex.
(Automated Environment = Less Manual Involvement = More Automation = More Complexity)

➢ Example to support above paragraph
If a company uses an integrated enterprise resource planning system (ERP) viz., SAP, Oracle etc., then
it is considered more complex to audit. On the other hand, if a company is using an off-the-shelf
accounting software, then it is likely to be less automated and hence less complex environment.

➢ Features of Automated Environment: (LIC FLASH )

• L- Provides Latest information.
• I- Integration between business operations
• C- Connectivity and Networking capability.
• F- Enables Faster business operations
• L- Ability to process large volumes of transactions
• A- Accuracy in data processing and computation
• S- Better Security and controls.
• H-Less prone to Human Errors.
Author’s Note

www.auditguru.in 3.45