 CAATs allow the auditor to:
a) Test programmed controls: in a computer based procurement system, there are large volume of transactions which the auditor will have to audit. The auditor will have to check if the programmed controls are functioning correctly. The only effective way of testing programmed controls is through CAAT.
b) Test on large volume of data: CAAT enable auditors to test large amount of data quickly and accurately and
therefore increase the confidence they have in their opinion.
c) Test on source location of data: CAAT enables auditors to test the procurement systems and its records (e.g. disk files) at its source location rather than testing the printouts of what they believe to be a copy of those records.
d) Cost effective: once set up CAAT are likely to be cost effective way of obtaining audit evidence year after year provided that the client does not change the procurement system regularly.
e)
Comparison: allows results from using CAAT to be compared to traditional testing. Where the two results agree this increase the overall audit confidence.
f) Independently access the data stored on a computer system without dependence on the client;
g) Test the reliability of client software, i.e. the IT application controls (the results of which can then be used to assess control risk and design further audit procedures);
h) Increase the accuracy of audit tests; and
i) Perform
audit tests more efficiently, which in the long-term will result in a more cost effective audit. (Visited 1,349 times, 1 visits today) Computer assisted audit techniques can be defined as any technique that enables the auditor to use Information technology systems as the source of gathering audit The following are disadvantage of CAATs :Setting up the software needed for CAATS in the first year is likely to be time consuming to re-expensive
Audit staff working on audit engagement will need to be trained so they have a sufficient level of
IT knowledge to apply CAATs when auditing.
If testing is performed on data in the live system, there is a risk that live client data may be corrupted and lost.
If the system has changed then it may be expensive and time consuming to re- design the CAATs in the next years
If the system is not compatible with CAATs then they will need to be tailored to the system, which may be costly.
If testing is performed on data from copies of the live files rather than the live data itself.
There is the risk that these files have been affected by the copying process or have been tampered with.
If there is not adequate system documentation available, it will be difficult to design appropriate CAATs due to a lack of understanding of the system
- 1 Computer assisted audit techniques (CAATs)
- 1.1 Audit software
- 1.2 Test data
- 1.3 Advantages of CAATs
- 1.4 Disadvantages of CAATs
- 1.5 Other techniques
Computer assisted audit techniques (CAATs) There are two broad categories of CAAT: - Audit software;
and
- Test data.
Audit software Audit software is used to interrogate a client's system. It can be either packaged, off-the-shelf software or it can be purpose written to work on a client's system. The main advantage of these programs is that they can be used to scrutinise large volumes of data, which it would be inefficient to do manually. The programs can then present the
results so that they can be investigated further. Specific procedures they can perform include: - Extracting samples according to specified criteria, such as:
- Random;
- Over a certain amount;
- Below a certain amount;
- At certain dates.
- Calculating ratios and select indicators that fail to meet certain pre-defined criteria (i.e. benchmarking);
- Check arithmetical accuracy (for example additions);
- Preparing reports
(budget vs actual);
- Stratification of data (such as invoices by customer or age);
- Produce letters to send out to customers and suppliers; and
- Tracing transactions through the computerised system.
These procedures can simplify the auditor's task by selecting samples for testing, identifying risk areas and by performing certain substantive procedures. The software does not, however, replace the need for the auditor's own procedures. Test data Test data involves the auditor submitting 'dummy' data into the client's system to ensure that the system correctly processes it and that it prevents or detects and corrects misstatements. The objective of this is to test the operation of application controls within the system. To be successful test data should include both data with errors built into it and data without errors. Examples of errors
include: - codes that do not exist, e.g. customer, supplier and employee;
- transactions above pre-determined limits, e.g. salaries above contracted amounts, credit above limits agreed with customer;
- invoices with arithmetical errors; and
- submitting data with incorrect batch control totals.
Data maybe processed during a normal operational cycle ('live' test data) or during a special run at a point in time outside the normal operational cycle ('dead'
test data). Both has their advantages and disadvantages: - Live tests could interfere with the operation of the system or corrupt master files/standing data;
- Dead testing avoids this scenario but only gives assurance that the system works when not operating live. This may not be reflective of the strains the system is put under in normal conditions.
Advantages of CAATs CAATs
allow the auditor to: - Independently access the data stored on a computer system without dependence on the client;
- Test the reliability of client software, i.e. the IT application controls (the results of which can then be used to assess control risk and design further audit procedures);
- Increase the accuracy of audit tests; and
- Perform audit tests more efficiently, which in the long-term will result in a more cost effective audit.
Disadvantages of CAATs - CAATs can be expensive and time consuming to set up, the software must either be purchased or designed (in which case specialist IT staff will be needed);
- Client permission and cooperation may be difficult to obtain;
- Potential incompatibility with the client's computer system;
- The audit team may not have sufficient IT skills and knowledge to create
the complex data extracts and programming required;
- The audit team may not have the knowledge or training needed to understand the results of the CAATs; and
- Data may be corrupted or lost during the application of CAATs.
Other techniques There are other forms of CAAT that are becoming increasingly common as computer technology develops, although the cost and sophistication involved
currently limits their use to the larger accountancy firms with greater resources. These include: Integrated test facilities - this involves the creation of dummy ledgers and records to which test data can be sent. This enables more frequent and efficient test data procedures to be performed live and the information can simply be ignored by the client when printing out their internal records; and Embedded audit software - this requires a purpose written audit program to be embedded
into the client's accounting system. The program will be designed to perform certain tasks (similar to audit software) with the advantage that it can be turned on and off at the auditor's wish throughout the accounting year. This will allow the auditor to gather information on certain transactions (perhaps material ones) for later testing and will also identify peculiarities that require attention during the final audit.
| Created at 10/3/2012 6:25 PM by System Account (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London
| Last modified at 11/2/2016 10:45 AM by System Account (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London
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| Tags: | CAATs;audit software;test data;IT audit software
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What are the advantages of computer assisted audit techniques?
Advantages of CAATs
CAATs allow the auditor to: Independently access the data stored on a computer system without dependence on the client; Test the reliability of client software, i.e. the IT application controls (the results of which can then be used to assess control risk and design further audit procedures);
What are the 5 kinds of computer assisted audit techniques?
CAATs include many types of tools and techniques, such as generalized audit software, customized queries or scripts, utility software, software tracing and mapping, and audit expert systems.
What are the computers assisted audit techniques explain?
Computer Assisted Audit Techniques or CAATs can be defined as an auditing method that uses computer software tools to query business data to produce reports that will enhance an audit.
What is the importance of CAATs in audit work?
CAATs may improve the effectiveness and efficiency of auditing procedures. They may also provide effective tests of control and substantive procedures where there are no input documents or a visible audit trail, or where population and sample sizes are very large.
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