For an accountant, we can look at problems of computerisation from two angles. Their impact on the system of internal control and their implications for the auditor.
The impact of computers in the system of internal control
There are special characteristics of an EDP system that the accountant must be aware of. Their basic differences from a manual system are:
(a) EDP systems take much longer and are more difficult to install. Inefficient installation can therefore result in major problems including accounting chaos that can lead to the accountant being unable to determine the truth and fairness of the accounts and at times can lead to the failure of the company.
(b) EDP systems are much more complicated and therefore can create problem of understanding for the accountant be he the auditor or just the company's accountant.
(c) The natural division of data processing between various parts of an organization and its accounting department is usually lost together with the understanding of the interest in data processing which managers have. This is because a large part of that data processing operations become centralised and there is concentration of power in the computer department. This may facilitate error and fraud and make its discovery difficult.
(d) The steps of processing and storage of data on magnetic files leaves no visible trail unless they are printed out. Most modern systems rely heavily on direct entry of data via key boards and the storage of data on discs. There is often no print out of outputs as information can be assessed as required on visual display units.
(e) Generally speaking, if correct data is presented to the machine and faultless computer programmes are used the output should be error free. These however reinforce the mistaken belief that machines do not make mistakes. But machines cannot be relied upon to recognize nonsense data. A machine will not think, it will do as it is told. Therefore if it has been instructed incorrectly it will always correctly make the same mistake, whereas a clerk in a manual system would be expected to notice and query this.
(f) Speed. A computer's potential for producing information in both terms of volume and speed is of course vast but its potential as vehicles of manipulation and fraud is equally great, and even if we were to leave aside the question of fraud, it is generally true that when production of vital data is dependent on a computer if things go wrong, they may go wrong on a truly big scale.