+

Computer -Assisted Audit Tools & Techniques

(CAATT)
DR. SELASI OCANSEY
 LEARNING OBJECTIVES
1. Define auditor productivity tools and describe how they
assist the audit process.
2. Describe techniques used to document application systems,
such as flowcharting, and how these techniques are developed
to assist the audit process.
3. Explain what Computer-Assisted Audit Techniques
(CAATs) are and describe the role they play in the
performance of audit work.
4. Describe how CAATs are used to define sample size and
select the sample.
 Computer -Assisted Audit Tools & Techniques
(CAATT)
Computer technology has become an integral part of
most organizational functions.
Itis likely that many audit clients either have
eliminated or will eliminate a substantial portion of
their paper documents and replace them with
electronic documents filed only in computerized
form.
An auditor who is unable to use computerized audit
tools and techniques effectively will be at a
disadvantage.
 Computer -Assisted Audit Tools & Techniques
(CAATT)
 Today’s auditor must be equipped with an
understanding of alternative tools and techniques to
test the operations of computerized systems and gather
and analyze data contained in computerized files.
 Auditorscan take advantage of those tools and
techniques to be more efficient and effective when
performing audit work.
 Computer -Assisted Audit Tools & Techniques
(CAATT)
 Tools and techniques used in IT audits include:
 Audit productivity tools: software that helps auditors reduce
the amount of time spent on administrative tasks by
automating the audit function and integrating information
gathered as part of the audit process.
 System documentation techniques: methods, such as
flowcharting, data flow diagram, and business process
diagrams applied to document and test application systems,
IT processes, and their integration within the IT environment.
 Audit Productivity Tools

 Tools and techniques used in IT audits include:

 Computer-assisted audit techniques (CAATs): software that
helps auditors evaluate application controls, and select and
analyze computerized data for substantive audit tests.
 Audit Productivity Tools
 The core of the audit process is assessing internal controls to
determine if they are effective or need improvement.
 However, many of the tasks associated with performing an
audit, such as planning, testing, and documenting results,
although necessary, take time away from performing the
actual control assessment work.
 Thisis where auditor productivity tools come into play.
Auditor productivity tools assist auditors in automating the
necessary audit functions and integrating information
gathered as part of the audit process.
 Audit Productivity Tools
 Examples of audit functions that may be automated through
auditor productivity tools include:
 Audit planning and tracking
 Documentation and presentations
 Communication
 Data management, electronic working papers, and groupware
 Resource management
 Audit Planning and Tracking
 Developing an audit universe with all of the potential audit
areas within the organization, a risk assessment prioritizing
these audit areas, an audit schedule, and a budget to track
audit progress are some of the necessary tasks in any audit
planning.
 Solutionssuch as spreadsheets, database software, and/or
project management software can be used to document and
plan audits, as well as track their current status.
 However, each of these solutions is standalone, as their
integration may not even be possible.
 Audit Planning and Tracking
 Because planning tasks are interdependent, an auditor
productivity tool software that integrates these planning and
tracking tasks would provide quicker update and ensure that
all phases of planning are kept in sync.
 Forexample, the budget should provide sufficient costs to
accomplish the audit schedule, or the audit schedule should
not exceed the resources available, etc.
 Documentation and Presentations
 Tools, such as the Microsoft Office suite, provide features to
facilitate the creation and presentation of documents.
 Forexample, spreadsheet data containing functional testing
results can be incorporated into a report document with a few
clicks of a mouse.
 These same data can then be copied to a presentation slide
and also be linked, so that changes to the source documents
will be reflected in any of the related documents.
 Documentation and Presentations
 Software tools like these save time and ensure consistency
and accuracy. Other tools include video conferencing and/or
video capture software to provide presentations to
collaborators worldwide and to document audit evidence,
respectively.
 Communication
 Software tools like these save time and ensure consistency
and accuracy. Other tools include video conferencing and/or
video capture software to provide presentations to
collaborators worldwide and to document audit evidence,
respectively.
 Because the auditor operates as part of a team, the need to
share data as well as to communicate with other members of
the group is important.
 Providingimmediate access to current data, electronic
messaging, and online review capabilities allow audit staff to
quickly communicate and gather research information for
audits and special projects.
 Communication
 Electronic
connectivity not only allows auditors to
communicate but also provides access for organization
management personnel or audit clients to exchange
information.
 Forinstance, client’s or organization’s management
personnel can be given access to the auditing risk universe
database.
 This
allows management to browse the database and suggest
changes to current audit risk areas.
 Communication
 Video conferencing capabilities are also an effective way for
communication.
 Video conferencing allows meetings to be conducted and
members to participate worldwide.
 Some of the best video conferencing software includes Cisco
WebEx Meeting Center, Citrix GoToMeeting, Zoom and
Adobe Connect, etc.
 Video conferencing capabilities are also an effective way for
communication.
 Video conferencing allows meetings to be conducted and
members to participate worldwide.
 Data Management, Electronic Working Papers,
and Groupware
 Establishingelectronic connectivity provides audit personnel
with the capability to access and input data into a central data
repository or knowledge base.
 The central data repository (e.g., database, etc.) can archive
historical risk, audit schedule, and budget data that can be
accessed electronically by all authorized users throughout the
audit group, regardless of physical location.
 Databaseapplications can be developed to automatically
consolidate data input electronically from all audit functions.
 Data Management, Electronic Working Papers,
and Groupware
 A database can contain information such as risk areas, audit
programs, findings, corrective action procedures, industry
standards, best practices, and lessons learned.
 Databases provide a platform for interactive activities such as
message boards or computer forums. Audit personnel (and
others, if authorized) can post new information or update old
information.
 Similarly, online storage of information allows auditors to
search for specific information in voluminous documents
(e.g., insurance code, etc.)
 Data Management, Electronic Working Papers,
and Groupware
 Electronic working papers or EWPs have also transformed
the audit process in a significant way. EWPs deliver a
consistent approach in creating, documenting, reviewing,
sharing, and storing audit work.
 When creating and documenting EWPs, auditors can
reference their work to evidence, document audit procedures
performed, and electronically sign-off their work without
waiting for other team members to complete and sign-off
their parts.
 Data Management, Electronic Working Papers,
and Groupware
 Groupware or collaborative software is a specialized tool or
assembly of compatible tools that enables business teams to
work faster, share more information, communicate more
effectively, and perform a better job of completing tasks.
 Groupware systems create collaborative work environments.
Today, we are seeing desktop conferencing,
videoconferencing, e-mail, message boards or forums,
meeting support systems, workflow systems, and group and
subgroup calendars as examples of groupware tools.
 Resource Management
 Another challenge for audit supervisors is to manage a
remote workforce. Whether a staff auditor is working on a
local audit or out in the field, managers need to be able to
provide guidance and review work as the audit progresses.
 Auditmanagers need to provide feedback while the staff
auditor is on location in case follow-up action is necessary.
 Flowcharting as an Audit Analysis Tool

 Auditorsprepare flowcharts using standard symbols and

techniques to represent application systems, workflows, or
processes.
 Flowcharts developed during the application analysis phase
of an audit engagement are most useful if they distinguish
processing according to department, function, or company
area.
 Thereare some very good application support packages for
flowchart development as well as the power of the word
processor to build diagrams and illustrations of the process.
 Flowcharting as an Audit Analysis Tool
 For an IT auditor, flowcharts represent a method for
identifying and evaluating control strengths and weaknesses
within a financial application system under examination.
 It can be time consuming to build an understanding of
strengths and weaknesses within a system to be audited.
 However, identification of strengths and weaknesses often is
crucial because they will drive the direction of the remainder
of the audit (e.g., substantiating and determining the effect of
identified control weaknesses, etc.).
Flowcharting as an Audit Analysis Tool

Example of a flowchart for a cash disbursement process

 Computer-Assisted Audit Techniques (CAATs)

 CAATs are tools for drawing inferences and gathering relevant and
reliable evidence as per requirements of the assignment.
 CAATs provide direct access to electronic information and
empower auditors not only to perform their existing audits more
efficiently and effectively but also facilitate them in knowing how
to create and execute new type of IT related audit assignments.
 CAATs provide a mechanism to gain access and to analyze data as
per audit objective and report the audit findings with greater
emphasis on the reliability of electronic information maintained in
the computer system.
 Computer-Assisted Audit Techniques (CAATs)

 CAATs are available in specific general audit software designed

for this purpose but the techniques of CAATs can be applied even
by using commonly used software such as MS Excel and by using
query/reporting features of commonly used application software.
 CAATs can be used to perform routine functions or activities
which can be done using computers, allowing the auditors to
spend more time on analysis and reporting.
 A good understanding of CAATs and know where and when to
apply them is the key to success.
 Need for CAATs
 Some of the key reasons for using CAATs are:
1. Absence of input documents or lack of a visible paper trail may
require the use of CAATs in the application of compliance and
substantive procedures.
2. Need for obtaining sufficient, relevant and useful evidence from the
IT applications or database as per audit objectives.
3. Ensuring audit findings and conclusions are supported by
appropriate analysis and interpretation of the evidence
4. Need to access information from systems having different hardware
and software environments, different data structure, record formats,
processing functions in a commonly usable format.
 Need for CAATs
 Some of the key reasons for using CAATs are:
5. Need to increased audit quality and comply with auditing standards.
6. Need to identify materiality, risk and significance in an IT
environment.
7. Improving the efficiency and effectiveness of the audit process.
8. Ensuring better audit planning and management of audit resources.
 Key Capabilities Of CAATs
 CAATs refer to using computer for auditing data as per audit
objectives. This requires understanding of the IT environment
and most critically the core applications and the relevant
database and database structure.
 CAATs could be used by using the relevant functionalities
available in general audit software, spreadsheet software or the
business application software. However, broadly the key
capabilities of CAATs could be categorized as follows:
1. File access: This refers to the capability of reading of different
record formats and fi le structures. These include common formats
of data such as database, text formats, excel files. This is generally
done using the import/ODBC function.
 Key Capabilities Of CAATs
2. File reorganization: This refers to the features of indexing, sorting,
merging, linking with other identified fi les. These functions
provide auditor with an instant view of the data from different
perspectives.
3. Data selection: This involves using of global filter conditions to
select required data based on specified criteria.
4. Statistical functions: This refers to the features of sampling,
stratification and frequency analysis. These functions enable
intelligent analysis of data.
5. Arithmetical functions: This refers to the functions involving use of
arithmetic operators. These functions enable performing re-
computations and re-performance of results.