Computer-Aided

Audit Tools
and Techniques

Randy T. Manzano
Introduction to Input Controls
Designed to ensure that the transactions that bring
data into the system are valid, accurate, and
complete
Data input procedures can be either:
 Source document-triggered (batch)
 Direct input (real-time)

Source document input requires human

involvement and is prone to clerical errors.

Direct input employs real-time editing techniques to

identify and correct errors immediately

2
Classes of Input Controls
1) Source document controls
2) Data coding controls
3) Batch controls
4) Validation controls
5) Input error correction
6) Generalized data input
systems

3
#1-Source Document Controls
 Controls in systems using physical source
documents
 Source document fraud
 To control for exposure, control procedures
are needed over source documents to
account for each one
 Use pre-numbered source documents
 Use source documents in sequence
 Periodically audit source documents

4
#2-Data Coding Controls
 Checks on data integrity during processing
 Transcription errors
 Addition errors, extra digits
 Truncation errors, digit removed
 Substitution errors, digit replaced
 Transposition errors
 Single transposition: adjacent digits transposed (reversed)
 Multiple transposition: non-adjacent digits are transposed
 Control = Check digits
 Added to code when created (suffix, prefix,
embedded)
 Sum of digits (ones): transcription errors only
 Modulus 11: different weights per column: transposition and
transcription errors
 Introduces storage and processing inefficiencies

5
#3-Batch Controls
 Method for handling high volumes of
transaction data – esp. paper-fed IS

 Controls of batch continues thru all phases of

system and all processes (i.e., not JUST an
input control)

1) All records in the batch are processed together

2) No records are processed more than once
3) An audit trail is maintained from input to output

 Requires grouping of similar input transactions

6
 #3-Batch Controls
 Requires controlling batch throughout
 Batch transmittal sheet (batch control record)
 Unique batch number (serial #)
 A batch date
 A transaction code
 Number of records in the batch
 Total dollar value of financial field
 Sum of unique non-financial field
• Hash total
• E.g., customer number

 Batch control log

 Hash totals

7
#4-Validation Controls
 Intended to detect errors in data
before processing

 Most effective if performed close to

the source of the transaction

 Some require referencing a master

file

8
#4-Validation Controls
 Field Interrogation
 Missing data checks
 Numeric-alphabetic data checks
 Zero-value checks
 Limit checks
 Range checks
 Validity checks
 Check digit
 Record Interrogation
 Reasonableness checks
 Sign checks
 Sequence checks
 File Interrogation
 Internal label checks (tape)
 Version checks
 Expiration date check
9
#5-Input Error Connection
 Batch – correct and resubmit
 Controls to make sure errors dealt with
completely and accurately
1) Immediate Correction
2) Create an Error File
 Reverse the effects of partially
processed, resubmit corrected records
 Reinsert corrected records in
processing stage where error was
detected
3) Reject the Entire Batch

10
#6-Generalized Data Input Systems
(GDIS)
 Centralized procedures to manage data input
for all transaction processing systems
 Eliminates need to create redundant routines
for each new application
 Advantages:
 Improves control by having one common
system perform all data validation
 Ensures each AIS application applies a
consistent standard of data validation
 Improves systems development efficiency

11
#6-GDIS

 Major components:

1) Generalized Validation Module

2) Validated Data File
3) Error File
4) Error Reports
5) Transaction Log 12
Classes of Processing Controls

1) Run-to-Run Controls

2) Operator Intervention
Controls

3) Audit Trail Controls

13
#1-Run-to-Run (Batch)
 Use batch figures to monitor
the batch as it moves from
one process to another
1) Recalculate Control Totals
2) Check Transaction Codes
3) Sequence Checks

14
#2-Operator Intervention
 When operator manually enters
controls into the system

 Preference is to derive by logic

or provided by system

15
#3-Audit Trail Controls
 Every transaction becomes traceable from
input to output
 Each processing step is documented
 Preservation is key to auditability of AIS
 Transaction logs
 Log of automatic transactions
 Listing of automatic transactions
 Unique transaction identifiers [s/n]
 Error listing

16
 Output Controls
 Ensure system output:
1) Not misplaced
2) Not misdirected
3) Not corrupted
4) Privacy policy not violated
 Batch systems more susceptible to exposure,
require greater controls
 Controlling Batch Systems Output
 Many steps from printer to end user
 Data control clerk check point
 Unacceptable printing should be shredded
 Cost/benefit basis for controls
 Sensitivity of data drives levels of controls

17
Output Controls
 Output spooling – risks:
 Access the output file and change
critical data values
 Access the file and change the
number of copies to be printed
 Make a copy of the output file so
illegal output can be generated
 Destroy the output file before printing
take place

18
 Output Controls
 Print Programs
 Operator Intervention:
1) Pausing the print program to load output paper
2) Entering parameters needed by the print run
3) Restarting the print run at a prescribed checkpoint after a
printer malfunction
4) Removing printer output from the printer for review and
distribution
 Print Program Controls
 Production of unauthorized copies
 Employ output document controls similar to source document
controls
 Unauthorized browsing of sensitive data by employees
 Special multi-part paper that blocks certain fields

19
Output Controls
 Bursting
 Supervision
 Waste
 Proper disposal of aborted copies
and carbon copies
 Data control
 Data control group – verify and log
 Report distribution
 Supervision

20
Output Controls
 End user controls
 End user detection

 Report retention:
 Statutory requirements (gov’t)
 Number of copies in existence
 Existence of softcopies (backups)
 Destroyed in a manner consistent
with the sensitivity of its contents

21
Output Controls
 Controlling real-time systems output
 Eliminates intermediaries

 Threats:
 Interception
 Disruption
 Destruction
 Corruption

 Exposures:
 Equipment failure
 Subversive acts

 Systems performance controls (Ch. 2)

 Chain of custody controls (Ch. 5)

22
Testing Computer
Application Controls
1) Black box (around)

2) White box (through)

23
Testing Computer Application
Controls –Black Box
 Ignore internal logic of application
 Use functional characteristics
 Flowcharts
 Interview key personnel
 Advantages:
 Do not have to remove application from
operations to test it
 Appropriately applied:
 Simple applications
 Relative low level of risk

24
Testing Computer Application
Controls –White Box
 Relies on in-depth understanding of the
internal logic of the application
 Uses small volume of carefully crafted,
custom test transactions to verify specific
aspects of logic and controls
 Allows auditors to conduct precise test
with known outcomes, which can be
compared objectively to actual results

25
White Box Test Methods
1) Authenticity tests:
 Individuals / users
 Programmed procedure
 Messages to access system (e.g., logons)
 All-American University, student lab: logon, reboot,
logon *
2) Accuracy tests:
 System only processes data values that
conform to specified tolerances
3) Completeness tests:
 Identify missing data (field, records, files)

26
White Box Test Methods
4) Redundancy tests:
 Process each record exactly once
5) Audit trail tests:
 Ensure application and/or system creates an
adequate audit trail
 Transactions listing
 Error files or reports for all exceptions

6) Rounding error tests:

 “Salami slicing”
 Monitor activities – excessive ones are serious
exceptions; e.g, rounding and thousands of
entries into a single account for $1 or 1¢

27
Computer Aided Audit Tools and
Controls(CAATTs)
1) Test data method
2) Base case system evaluation
3) Tracing
4) Integrated Test Facility [ITF]
5) Parallel simulation
6) GAS

28
#1 –Test Data
 Used to establish the application processing
integrity
 Uses a “test deck”
 Valid data
 Purposefully selected invalid data
 Every possible:
 Input error
 Logical processes
 Irregularity

 Procedures:
1) Predetermined results and expectations
2) Run test deck
3) Compare

29
#2 – Base Case System
Evaluation (BCSE)
 Variant of Test Data method

 Comprehensive test data

 Repetitive testing throughout SDLC

 When application is modified, subsequent

test (new) results can be compared with
previous results (base)

30
#3 – Tracing
 Test data technique that takes step-by-step
walk through application

1) The trace option must be enabled for the application

2) Specific data or types of transactions are created as

test data

3) Test data is “traced” through all processing steps of

the application, and a listing is produced of all lines of
code as executed (variables, results, etc.)

 Excellent means of debugging a faculty

program
31
Test Data: Advantages and Disadvantages
 Advantages of test data

1) They employ white box approach, thus providing explicit

evidence
2) Can be employed with minimal disruption to operations
3) They require minimal computer expertise on the part of
the auditors
 Disadvantages of test data

1) Auditors must rely on IS personnel to obtain a copy of

the application for testing
2) Audit evidence is not entirely independent
3) Provides static picture of application integrity
4) Relatively high cost to implement, auditing inefficiency
32
#4 – Integrated Test Facility
 ITF is an automated technique that allows auditors
to test logic and controls during normal operations
 Set up a dummy entity within the application
system
1) Set up a dummy entity within the application system
2) System able to discriminate between ITF audit module
transactions and routine transactions
3) Auditor analyzes ITF results against expected results

33
 #5 – Parallel Simulation
 Auditor writes or obtains a copy of the program
that simulates key features or processes to be
reviewed / tested
1) Auditor gains a thorough understanding of the
application under review
2) Auditor identifies those processes and controls critical
to the application
3) Auditor creates the simulation using program or
Generalized Audit Software (GAS)
4) Auditor runs the simulated program using selected data
and files
5) Auditor evaluates results and reconciles differences 34