ST.

MARY’S UNIVERSITY
SCHOOL OF GRADUATE STUDIES
MBA IN ACCOUNTING AND FINANCE

AN ARTICLE REVIEW ON
AUDITING IN SYSTEM PRESPECTIVE

SUBMITTED TO:
ASS. PROF. DANIEL TOLOSSA

SUBMITTED BY:
1. JERUSALEM JABO (SGS/0672/20154)
2. MOHAMED ABDULKADIR (SGS/0127/2015A)
3. TEWODROS KASSA (SGS/0133/2015A)
4. WEDAJE ALEMAYEHU (SGS/0135/2015A)

JUNE 2023
Auditing in Systems Perspective
Author(s): H. J. Will
Source: The Accounting Review, Vol. 49, No. 4 (Oct., 1974), pp. 690-706
Published by: American Accounting Association

Summary of the article

The article presents a theoretical argument for the development of a resulting information
processing theory of auditing. The author argues that such a theory would integrate decision-
theoretical and pragmatic audit concepts and increase judgmental reliability in auditing. The
paper discusses the importance of taking a systems perspective in auditing and the distinction
between the "Observation Plane" and the "Theory Plane" in auditing. The author emphasizes
the need for a more structured and integrated approach to audit judgment and highlights the
cognitive problems of auditing. The paper also discusses the potential benefits of a resulting
information processing theory of auditing, including increased efficiency and effectiveness in
audit practice. However, the paper does not present any empirical findings from a study and
may be difficult to understand for readers without a strong background in auditing and
accounting.

Review Report

(1) What overall purpose does the article seem to have?

The overall purpose of the article is to improve auditor’s professional judgment' decision making in
various stages of financial statement audits, from planning to conclusion. Auditors always use their
professional judgment when faced with substantiation issues. Until now, sufficient criteria have not
been set to make audit judgment and current efforts indicate important contributions to identify the

criteria used by auditors in forming their opinions. Its main objective is to show recent developments
in (computerized) accounting, management information systems (MIS) and audit language design.
Modern MIS technology and designs require clear treatment of the auditor's MIS interface in
systematic and functional dimensions. This can be done very conveniently using a common auditing
language. First, the paper critically evaluates the ASOBAC audit model, then expands this into a

control model, and then interprets it as a general human-machine audit model. According to the

ASOBAC Model, its findings can be applied to any subject with three important features. Given the
complexity of audit tasks, a different approach to the study of audit judgment looks more appropriate:
systematic analysis of the actual steps taken by an auditor, if these can be adequately documented in a
protocol.

In general, the overall purpose of the article is to explore the application of audit judgment as
a cognitive information processing problem and to discuss the importance of taking a systems
perspective in auditing.

(2) Does the author clearly state an explicit thesis?

Yes, the author clearly states an explicit thesis in the article. The thesis is that the
development of a resulting information processing theory of auditing would integrate
decision-theoretical and pragmatic audit concepts and increase judgmental reliability in
auditing. The author argues that such a theory is necessary to address the cognitive problems
of auditing and to provide a more structured and integrated approach to audit judgment. The
thesis is presented in the introduction of the article and is supported throughout the paper
with evidence and examples from previous research and literature.

(3) Does the author have a specific point of view?

Yes, the author has a specific point of view in the article. The author attempt to expand A Statement
of Basic Auditing Concepts (ASOBAC) in general system and in information system perspective. Its
major objective is to demonstrate how ASOBAC can be related to the most recent developments in
computerized accounting, management information systems (MIS), and audit language design. First,
the paper critically reviews the ASOBAC audit model, next broadens this into a control model, and
subsequently reinterprets it as a comprehensive man-machine audit model.

(4) What are the theories discussed in the paper and how do they compare?

The author discussed the following Models: -

a. ASOBAC MODEL: - This model describes the role of the audit function in the communication
process related to accounting information. A wide range of ASOBAC audit concepts can be
implemented by incorporating general systems and information systems concepts as well as modern
data processing capabilities.

b. THE EXTENDED ASOBAC MODEL: - The audit program is not simply a choice of decision rule, but
rather represents the result of a comprehensive problem-solving effort. Rather than formally
examining the issue here as a decision problem, it is intended to extend the ASOBAC model from a
systems perspective by viewing audit work first as a control problem in the MIS context and then as a
man-machine information management issue.

c. THE CONTROL MODEL: - This audit process may be described as a flow, but should not be
considered a standard process unless decision-theory or professional provisions are defined for
various audit procedures beyond existing general auditing standards. Although various descriptions of
the audit procedure and fieldwork standards require the auditor.

d. THE MAN-MACHINE MODEL: - the model provides a basis for further improvement and
implementation of the audit process in a (computerized) MIS environment. Facilitates auditing
programs in any general-purpose host language or in multiple specialized user languages.

(5) If the author argues supporting/rejecting a theory, what are his reasons and how valid are
the reasons?
Author's departure of point is auditors always use their professional judgment when faced with
substantiation issues. But there is no set standard or discussions for such problems. It was brought up
with the concept that this issue should be standardized and should be supported by a computerized
system. the concept is good, but since it requires a lot of resources to implement it, the idea should be

thoroughly criticized by various scholars. Also, the computerized system does not think and consider
things by itself and make a rational decision. Because it cannot be regarded without the installed

program. It analyzes and evaluates things only according to the installed program. This makes
computerized system impossible to evaluate and investigate things as a human being.

(6) How well are conclusions of the article aligned with the findings of the study?

The article does not present any findings from a study. Rather, it presents a theoretical
argument for the development of a resulting information processing theory of auditing. The
author supports their argument with evidence and examples from previous research and
literature. Therefore, the conclusions of the article are aligned with the author's theoretical
argument and the evidence presented. However, the article does not present any empirical
findings from a study.

(7) What exactly does the work contribute and relate to the overall topic of your
course?

The work contributes to the overall topic of auditing and accounting by presenting a
theoretical argument for the development of a resulting information processing theory of
auditing. The author argues that such a theory would integrate decision-theoretical and
pragmatic audit concepts and increase judgmental reliability in auditing. The paper also
discusses the importance of taking a systems perspective in auditing and the distinction
between the "Observation Plane" and the "Theory Plane" in auditing. The work relates to the
overall topic of auditing and accounting by highlighting the cognitive problems of auditing
and the need for a more structured and integrated approach to audit judgment. It also
emphasizes the importance of a systems perspective in auditing and the need to integrate
decision-theoretical and pragmatic audit concepts. Overall, the work contributes to a deeper
understanding of the theoretical and methodological foundations of auditing and accounting.

(8) In your opinion, what were the strengths and weaknesses of the paper?

Here, we can provide an analysis of the strengths and weaknesses of the paper based on its
content.

Strengths:

- The paper presents a well-reasoned argument for the development of a resulting

Weaknesses:

- The paper does not present any empirical findings from a study.
- The paper is theoretical in nature and may not provide practical guidance for auditors.
- The paper may be difficult to understand for readers without a strong background in
auditing and accounting.
- The paper does not address potential criticisms or limitations of the resulting
information processing theory of auditing.

Conclusion
The conclusion of the article summarizes the main points made by the author and emphasizes
the importance of developing a resulting information processing theory of auditing. The
author argues that such a theory would integrate decision-theoretical and pragmatic audit
concepts and increase judgmental reliability in auditing. The author also highlights the
potential benefits of a resulting information processing theory of auditing, including
increased efficiency and effectiveness in audit practice. The conclusion emphasizes the need
for a more structured and integrated approach to audit judgment and highlights the potential
for a resulting information processing theory of auditing to contribute to the development of
such an approach. Overall, the conclusion of the article reinforces the author's argument in
favour of the development of a resulting information processing theory of auditing and
highlights the potential benefits of such a theory for the field of auditing.