Guide to Using International Standards on Auditing in - IFAC

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<strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts
This requires pertinent information <strong>to</strong> be identified, captured, and communicated/distributed on a timely
basis <strong>to</strong> personnel (at all levels of the entity) who need it for decision-making.
An information system consists of infrastructure (physical and hardware components), software, people,
procedures, and data. Many information systems make extensive use of information technology (IT). They
identify, capture, process, and distribute information supporting the achievement of financial reporting and
internal control objectives.
An information system relevant <strong>to</strong> financial reporting objectives includes the entity’s business processes and
accounting system, as set out below.
Exhibit 5.5-1
Business Processes
(Sales, Purchases,
Payroll, etc.)
Accounting
System
Business processes are structured sets of activities designed <strong>to</strong> produce a specified
output. They result in transactions being recorded, processed, and reported by the
information system.
This includes accounting software, electronic spreadsheets, and the policies and
procedures used <strong>to</strong> prepare periodic financial reports and the period-end financial
statements and disclosures.
An information system has procedures, policies, and records (manual and au<strong>to</strong>mated) designed <strong>to</strong> address the
matters set out below.
Exhibit 5.5-2