Auditing Information Systems, Second Edition

6.3. EXAMINING ACCOUNTING TREATMENT OF COMPUTER HARDWARE AND SOFTWARE

Internal auditors should examine the proper accounting for computer hardware, software, maintenance, and other costs to determine whether such costs have been properly recorded on the financial statements. For example, computer equipment and software should be capitalized and amortized over their estimated useful lives. Prepaid maintenance costs should be classified as assets and expensed only when the costs applicable to the period in question have been realized. If equipment and/ or maintenance is billed on a monthly basis, the costs should be expensed as incurred.

The audit steps described in this section are not necessarily the type of steps a specialized information systems auditor would perform. If an organization is small and has only one or two internal auditors, those persons will likely have a background in accounting, finance, or industry operations. This type of internal auditor will be more likely to audit the accounting treatment of costs associated with computer equipment and software than would a specialized IS auditor.

If an organization has a large Internal Audit Department, these steps would likely be performed by one or more financial or operational auditors. If the organization uses an integrated audit approach whereby a team of auditors with expertise in various disciplines perform an audit of an entire process, examination of the accounting treatment of computer equipment and software ...