9/19/2018

CAATs –
Computer
assisted audit
techniques

CAATs – Where do they come in and

what are they?
So remember as an auditor in computerized environment we still have to:

• Gain an understanding of controls in place – So we need to know what controls are

possible.
• Identify Risk – So we need to be aware of the increased and decreased risks
associated with computer systems.
• Test the computer controls – We can now use SYSTEM CAATs to help us.
• Perform Substantive audit work – We can now use DATA CAATs to help us.

A CAAT is a “computer assisted audit technique” that is useful because:

• Can test a computer system is working without relying on source documents,
• Improves efficiency and effectiveness of audit work,
• Processes balances with large volumes of transactions quickly,
• Identify risk area’s (Analytical review) – anomalies, unusual transactions, ratios.

When are CAATs used in the audit

process?

• No
Planning • Yes – Testing controls with test
C&R
data (System CAAT)
• Yes – analytical review for risk • Yes – In substantive procedures • Can be used in final analytical
assessment = NB! (Data CAAT) review
• Unusual trends/ movements • Going concern – forecasts and
which indicate risk AR to prior
• Subsequent events – sample
selection
Pre-liminary Gathering • Errors – extrapolation

engagement audit evidence

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What is the difference between a

system and data CAAT?
For example:

System CAATs use test data to test that a
computerised control is working as it should. It runs test
or fake data through a system to compare the expected
outcome to the actual outcome. Used in the
reperformance of a computerised control.
DATA CAATs do not use test data. They can perform
analysis of data in different ways that can be useful
while performing substantive procedures – both
analytical reviews and tests of detail. These include:
• Extracting information (based on certain instructions)
• Analysing information
• Summarising information
• Selecting samples
• Recalculating
Purchases over a certain value require the
approval of a senior manager. Therefore run
a system CAAT through the system by
inputting a purchase that exceeds to value to
verify another manager is notified + required
to approve it.
Extract a sample of all employees who
commenced employment in the current year
so the further detail testing can be
performed.
Compare the current provision for bad debts
ratios to actual bad debts for prior 10 years.

Think of…

System CAATs Data CAATs

So what is the hard part?

• System CAATs:
▪ Understanding where it is appropriate to run a system CAAT
▪ Identifying what controls would be tested and explaining how to test the output by describing
the correct input.
▪ Input XYZ to verify that ABC happens

• Data CAATs:
▪ Being able to think about how/ what information could be analysed and what sort of exceptions/
anomalies/ trends would be interesting to the auditor.
▪ This requires an understanding of what SHOULD be happening but also an awareness of WHAT
CAN GO WRONG or what would INDICATE something has gone wrong.
▪ For example – A debit account with a credit balance, a purchase recorded on a weekend, a sale
over a certain value etc etc

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Exam technique
• Do you always give CAATs in a test of control or substantive procedure question?
• In a computerised control system or transaction cycle – if possible then yes.
• If you are specifically asked – then definitely yes.
• Often the audit procedure remains the same but your description now specifically states:
• Get the computer to select a sample, or perform the recalculation or run a system CAAT to verify
that…
• Statements like:
• “Use a system CAAT to verify the control is working” will not gather marks.
• You need to state how – what is the input and expected output.
• “Perform an analytical review of payables using data CAATs”
• You need to expand and give examples of what reviews and why they important.

Thank You