System based audit approach is quite similar to the risk-based audit approach. This approach required the auditor to understand and assess the effectiveness of the client’s key control system especially the key system related to financial reporting.
Once the auditor assesses the effectiveness of the system, auditors’ works then focus on the areas that are more concerned. Auditor also assesses whether the control system set by the entity is meeting the objective or not.
The substantive audit procedures and audit works might reduce the area that is less concerned by auditors or the areas that result in the assessment concludes fewer risks.
System based audit approach could help auditors to reduce the works that auditors perform by them on the areas that do not add value to them.
In other words, the auditor will pay very close attention to the areas that have high risks of material misstatement on the financial statements than on the low risks. By using System based audit approach, the auditor could minimize their risks of issued incorrect opinions.