Using CAATs

NotesQuizPaper examCBE

CAATs use a computer to assist the auditor in testing during the audit procedures

There are 2 categories of CAAT:

  1. Audit Software

  2. Test Data

Audit Software

The auditor may use audit software to run the client data to check for errors

It can be an off-the-shelf software or bespoke for the client. 

They can scrutinise large volumes of data, whose results  can be investigated further

The software does not, however, replace the need for the auditor's own procedures

It can do the following:

  • select a sample using different sampling techniques

  • check calculations

  • automate the confirmation letter process

  • produce reports

  • follow transactions

Test Data

Another method which may be used by the auditor is the use of test data. 

This is really putting a dummy transaction through the system to ensure that controls are working and that calculations are performed correctly

Examples of errors

  • Codes don't actually exist, e.g. customer, supplier and employee;

  • Transactions above pre-set limits, e.g. credit limits

  • Invoices with arithmetical errors

Auditing around the computer

Meaning the auditor does not audit how the computer works, but rather checks that the inputs generate the expected outputs from the system

  • This increases audit risk as the auditor cannot tell with certainty whether the internal processes of the system are working correctly

  • It is very difficult to determine why errors occurred

    Also fixing them may need an external expert

Advantages & Disadvantages of CAATs

  • Advantages

    1. Independently access computer data

    2. Test the reliability of client software

    3. Increase the accuracy of audit tests

    4. Perform audit tests more efficiently

  • Disadvantages

    1. CAATs can be expensive and time consuming to set up

    2. Client permission and cooperation may be difficult to obtain

    3. Potential incompatibility with the client's computer system

    4. The audit team may not have sufficient IT skills

    5. Data may be corrupted or lost during the application of CAATs

NotesQuizPaper examCBE