KLM Industries Ltd., a mid-sized company engaged in consumer electronics manufacturing, has recently undergone a major digital transformation by…
CA Final · Advanced Auditing, Assurance and Professional Ethics · MTP · September 2025
KLM Industries Ltd., a mid-sized company engaged in consumer electronics manufacturing, has recently undergone a major digital transformation by implementation of a fully automated production tracking system, cloud-based accounting software, and a blockchain-based vendor payment system. These changes were introduced during the financial year 2024-25. The management believes that these technologies will increase the efficiency and reduce the chances of errors, and hence, have revised the risk assessment accordingly. As an auditor, what steps should you take to evaluate the impact of such technology changes on the company's internal controls and financial reporting?
Suggested Answer and Working Notes:
Steps that the auditor should take to evaluate the impact of technology-driven changes on the company's internal controls and financial reporting include the following: Maintain sufficient professional skepticism when reviewing management's risk assessment for new systems.Understand the direct and indirect effects of new technology and determine how its use by the entity impacts the auditor's overall risk assessment.Understand how the technologies impact the flow of transactions, assess the completeness of the in-scope ICFR systems, and design a sufficient and appropriate audit response.Assess the appropriateness of management's processes to select, develop, operate, and maintain controls related to the organization's technology based on the extent the technology is used.
Topics: Digital Auditing & Assurance
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