WWW Limited, a company specializing in mobile spare parts, operates showrooms across the country. In FY 2020-21, the company transitioned from a manual accounting system to a computerized system using SAP. Recognizing th

Understanding and Documenting Automated Environment: When a business operates in a more automated environment it is likely that auditor will see several business functions and activities happening within the systems. Key features of an Automated Environment Enabling faster business operation Accuracy in data processing and computation Ability to process large volume of transactions Better security and controls Less prone to human errors Provides latest information While it is true that the use of IT systems and automation benefit the business by making operations more accurate, reliable, effective and efficient, such systems also introduce certain new risks, including IT specific risks, which need to be considered, assessed and addressed by management. To the extent that it is relevant to an audit of financial statements, even auditors are required to understand, assess and respond to such risks that arise from the use of IT systems. Given below are some situations in which IT will be relevant to an audit Increased use of Systems and Application software in Business (for example, use of ERPs). Complexity of transactions has increased (multiple systems, network of systems). Hi-tech nature of business (Telecom, e-Commerce). Volume of transactions are high (Insurance, Banking, Railway's ticketing). Company Policy (Compliance). In some of the above situations it is likely that carrying out audit using traditional substantive audit procedures may be difficult or even not feasible if the company prepares, records and conducts majority of business activities through IT systems only. Another area where IT can be relevant to audit is by using data analytics using computer assisted audit techniques (CAATs). By using data analytics, it is possible to improve the effectiveness and efficiency of an audit. From the above discussion, it is quite apparent that it is necessary for an auditor to understand the automated environment.