For the phone orders, if a customer has a customer number, it should be verified against a

master file. If a customer needs to establish a customer number, one should be assigned, and the
customer’s name should be entered. A missing data check should be used to verify that a first
name, last name, and street address have been entered. If the firm has a U.S. zip code database,
the zip code can be entered and the city and town should appear.

The payment method should be a menu choice of credit cards that are accepted. The credit
card number should be entered into an alpha-numeric field as well as the expiration date—a
numeric field. Once the order is totaled, authorization with the credit card company will be
provided online. The item ordered should be entered and verified against an inventory master
file. The description should appear and be read to the customer and verified as accurate. The unit
price should automatically appear. The quantity should be entered, and a range check performed
to see if the order is reasonable.For the batch processed data, customers without customer
numbers should be placed into a batch for adding and receiving customer numbers before the
order can be processed. For those orders with customer numbers, the data will be grouped into
batches. Check digits will be calculated for the customer numbers and the inventory items. Any
records that have an invalid customer number, invalid inventory item, check digits that do not
match, or an unreasonable quantity ordered will be written to an error file, and the rest of the
orders will be processed. The cleantransactions should be sorted according to charge type and the
credit card numbers verified. Any rejected transactions will be sent to a special file from which
letters will be sent to the customer. The doubly-clean transactions will then be processed. The
real-time processing technique is more efficient because any errors can be resolved easily and
immediately.

1. Correct immediately. In the direct data validation approach, error detection and
correction can also take place during data entry. When an error or illogical relationship is
entered, the system should halt the data entry procedure until the error is corrected.

Create an error file. In the delayed data validation approach, errors are flagged and placed
in an error file. Records with errors will not be processed until the error is investigated
 and corrected. Some errors can be detected during data input procedures.

Reject the batch. Some errors are associated with the entire batch and are not attributable
to individual records. An example of this is a control total that does not balance. The
entire batch is placed in the error file and will be reprocessed when the error is corrected.

2. Input controls. Organizations need to set controls with aim to prevent erroneous data
from being entered into computer system or to detect and remove mistakes from system
and recapture the integrity of financial information. Input controls should be designed in
such a manner to give reasonable assurance that input data is correctly authorized and
entered into computer system. Completeness and accuracy of entered data depends on
successful combination of different data check methods. The most important input
controls are (Andrić, Krsmanović, & Jakšić, 2004):

Three Techniques.
Field interrogation involves programmed procedures that examine the characteristics of
the data in the field and include check digits, missing data checks, numeric-alphabetic
checks, limit checks, range checks and validity checks.
Record interrogation procedures validate the entire record by examining the
interrelationship of its field values and include reasonableness checks, sign checks and
sequence checks.
File interrogation is used to ensure the correct file is being processed by the system and
include internal and external label checks and version checks.

3. The audit preservation of an audit trail is an important objective of process control. In an

accounting system, every transactions must be traceable through each stage of processing
 from its economic source to its presentation in financial statements. In an automates
environtment, the audit trail can become fragmented and difficult to follow. It thus
becomes critical that each major operation applied to transaction be thoroughly
documented.

- Transaction logs list all transactions successfully processed by the system and serve
as journals, permanent records. Transactions that were not processed successfully
should be recorded in an error file. There are two reasons for creating a transaction
log. First, the transaction log is a permanent record of transaction. Second, not all of
the records in the validated transaction file may be successfully processed.
- Logs and listings of automatic transactions should be produced for transactions
received or initiated internally by the system.
- Unique transaction identifiers should be attached to each transaction processed. Each
transactions processed by the system must be uniquely identified with a transaction
number. This is the only practical means of tracing a particular transaction through a
database of thousands or even millions of records.
- Error listing should document all errors and be sent to appropriate users to support
error correction.

4. - Test data. Test data technique is based on auditors’ creation of input data that should be
processed by client’s application. Test data consist of correct and incorrect data. If
incorrect data is entered into the system, auditor expects the input rejection. Results of
input procedures are compared with expected behavior of application in order to
determine whether input controls are in place.
Auditors feel uncomfortable with the risk that client application during the period could
differ from the one tested. In order to mitigate this situation, application of test data
technique could be carried out by unexpected visit and copying of client’s programs for
later inspection.
- Base Case System Evaluation (BCSE). Is a variant of the test data approach. BCSE test
are conducted with a set of test transactions containing all possible transactions types.
 These are processed through repeated iterations during systems development testing until
consistent and valid results are obtained. These validated results become the base case.
When subsequent changes to the application occur during maintenance, their effects are
evaluated by comparing current results with base case results.

- Tracing. Annother type of the test data technique called tracing performs an electronic
walk through of the application’s internal logic. The tracing procedure involves three
steps:

~The application under review first undergoes a special complication process to

activate the trace feature.
~Test data transactions are created
~The test data transactions are traced through all processing stages of the
program,and a listing is produced of all programmed instructins that were
executed during the test.

- Integrated test facility. Integrated test facilities are built-in test environments within a
system. This approach is used primarily with large-scale, online systems serving multiple
locations within the company or organization. Integrated test facility is a variation of test
data technique. The main difference is that instead of checking information system while
not in use, simulated data are added to client’s real data and processed simultaneously.
In order to avoid contamination of client’s real data, procedures for separation and
extraction of simulated data from the computer system should be defined before the
application of integrated test facility technique and executed upon the end of testing.

- Parallel Simulation. In test data and integrated test facility techniques audit tests are
based on simulated data, while in parallel simulation technique auditor uses actual data
which is processed with clients’ and auditor’s program.
The main advantage in utilization of parallel simulation is a possibility than auditor’s
program could have additional controls embedded, which enables the valuation of effects
of nonexistent control procedures. The main disadvantage lies in significant cost of audit
programming if written uniquely for one client. Parallel simulation is the best technique
for verification of calculations (depreciation, interest, taxes, payroll etc.).

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