CAAT ppt.pptx (Computer Asstt. Technique)

Computer assisted Audit techniques

1. CAAT Computer Assisted Audit Techniques Ms. Swati Singh Assistant Audit Officer Regional Training Centre, Delhi

2. Content Introduction CAATs and Auditors Need for CAATs Methodology for using CAAT s Examples of Test performed using CAATs Key Capabilities of CAATs Precautions while using CAATs IDEA Introduction

3. Introduction Auditors deals with information in innumerable ways encompassing the areas of accounting, assurance, consulting and compliance etc. Most of the above information is now available in the electronic form. This is true not only in case of large and medium organizations but even in small enterprises. Information technology is all pervasive and more so as the government and regulatory agencies also are using technology platform to provide services to citizens and compelling information to be filled in electronic forms. The government at all levels has drawn up ambitious plans to implement e-Governance initiatives to improve speed, access and transparency of services. Very critical for Auditors to understand and use information technology

4. CAATs Computer Assisted Audit Techniques (CAATs) Using technology for increasing the effectiveness and efficiency of auditing CAATs enables auditors to do more with less and add value through the assurance process which is more robust and comprehensive

5. CAATs and Auditors C omputer and communication technology are the two most common factors among our auditees , both large and small. We also use computers and communication technology for providing services to our auditees . Thus, in today’s complex and rapidly changing technology environment, it is pertinent to mast the right techniques that can be used across enterprises and across various technology platforms.

6. CAATs and Auditors contd. Typical of a IT environment: The speed of processing, large storage capacity, lack of the paper based trails, the radically different ways of information processing, the ease of information access, embedded internal controls and the ever-present risk of failure of IT and loss of data . All these factors make it imperative for auditors to harness power of technology to audit technology environment by taking into consideration the risk, benefits as well as advantages.

7. CAATs and Auditors contd. 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. There is higher reliability on the audit process as the source of the information used provides greater assurance on audit findings and opinion.

8. Need For CAATs Ensuring audit findings and conclusions are supported by appropriate analysis and interpretation of the evidence. Need to access information from systems having different hardware and software environments, different data structure, record formats, processing functions in commonly usable format. Need to increase audit quality and comply with auditing standards . Need to identify risk and significance in an IT environment. Improving the efficiency and effectiveness of audit process. Ensuring better audit planning and management at audit resources.

9. Methodology for using CAATs It is important to formulate appropriate strategies to ensure CAAT’s effective use. Some of the key strategies are : Identify the scope and objective of the audit. Based on this, auditor can decide regarding the need and the extent to which CAATs should be used. Identify the critical data which is being audited as per audit scope and objectives. Identify the source of data from the enterprise information system/ application software The data could be relating to general ledger, inventory payroll etc.

10. Methodology for using CAATs Identify the relevant personnel responsible for the data and information. These personnel could be from the IT department, vendors, mangers etc . Obtain and review documents relating of data/information system. This should provide information about data types/ data structure and data flow of the system. Understanding the software by having a walk-through right from user creation grant of user access, configuration settings, data entry, query and reporting features.

11. Methodology for using CAATs Decide what techniques of CAATs could be used as relevant to the environment by using relevant CAAT software as required. Prepare a detailed plan for analyzing the data Perform relevant tests on audit data as required and prepare audit findings which will be used for forming audit report/ opinion as required.

12. Examples of Test Performed using CAATs CAATs can be used for compliance or substantive tests. Some important test which can be performed using CAATs are Identify exceptions Identify exceptional transactions based on set criteria. For example, cash transactions above Rs . 20,000. Analysis of Controls Identify whether controls as set have been working as prescribed. For example, transactions are entered as per authorized limits for specified users

13. Examples of Test Performed using CAATs Identify errors Identify data, which is inconsistent or erroneous. For example: account number which is not numeric (data entry errors). Statistical sampling Perform various types of statistical analysis to identify samples as required. Detect frauds Identify potential areas of fraud. For example, transactions entered on holidays or purchasing from vendors who are not approved.

14. Examples of Test Performed using CAATs Verify Calculations Re-perform various computation in audit software to confirm the results from application software confirm with the audit software. For e.g. TDS rate applied as per criteria. Existence of records Identify field, which have null values. For example : invoices which do not have vendor names. Data completeness Identify whether all fields have valid data. For example: null values in any key field such as date, invoice number or value or name.

15. Examples of Test Performed using CAATs Data consistency Identify data, which are not consistent with the regular format. For example, invoices which are not in the required sequence. Duplicate payments Establish relationship between two or more tables as required. For example, duplicate payments for same invoice. Accounts exceeding authorized limit Identify data beyond specified limit. For example, transactions entered by user beyond their authorized limit or payment to vendor beyond amount due or over draft allowed beyond limit.

16. Key Capabilities of CAATs CAATs could be used by using the relevant functionalities available in general audit software, spreadsheet software or the business application Broadly, the key capabilities of CAATs could be categorized as follows : File access : Refer to the capability of reading of different record formats and file structures. These include common formats of data such as database, text formats, excel files. This is generally done using the import/ODBC function. File reorganization : Refer to the features of indexing, sorting, merging, linking with other identified files. These functions provide auditor with an instant view of the data from different perspectives.

17. Key Capabilities of CAATs Data Selection : This involves using of global filter conditions to select required data based on specified criteria. Statistical function : This refers to the features of sampling, stratification and frequency analysis. These function enables intelligent analysis of data. Arithmetical functions : This refers to the functions involving use of arithmetic operators. These functions enables performing re-computations and re-evaluation of results.

18. Precautions while using CAATs CAATs have distinct advantages for Auditors and enables them to perform various types of tests. However, it is important to ensure that adequate precautions are taken in using them. Some of the important precautions to be taken by Auditors are : Identify correctly data to be audited. Collect the relevant and correct data files. Identify all the important fields that need to be accessed from the system. State in advance the format in which the data has to be downloaded and define the fields correctly.

19. Precautions while using CAATs Ensure the data represent the audit universe correctly and completely. Ensure the data analysis is relevant and complete. Perform substantive testing as required. Information provided by CAATs could only be indicator of problem as relevant and therefore detailed testing may be required.

20. INTRODUCTION TO IDEA. IDEA is a CAAT Tool IDEA – Interactive Data Extraction and Analysis Product of Caseware IDEA inc , Canada Dedicated Software for Data Analysis

21. 3.1 FEATURES OF IDEA Imports data from a wide range of file types Perform complex calculations with ease Tests for missing or duplicate items Selects samples using systematic, random or monetary unit techniques Matches or compares data from different sources Performs analyses of data including comprehensive statistics, profiles, summaries, ageing Maintains an audit trail/log of all operations performed Includes a development tool and IDEAScript that extends the power and functionality

22. 3.2 Why is IDEA a preferred CAAT tool for auditors Menu driven functions rather than command driven functions Ease of data extraction The ability to access a wide variety of data files from different platforms Simplified query building Convenient template recall and use Ease in automation of tasks Simplicity in scheduling of automated tasks for continuous monitoring

23. 4. STAGES OF DATA ANALYSIS USING IDEA Import Data Import from virtually any source from PDF to ERP Perform Analysis Extract Sort Search Group Calculated fields Stratify Summarize Age Gaps Duplicates Sample Statistics Join Append Compar e Review Results Pivot Tables Reports Charts Exports History Project Overview

24. 4.1 IMPORT DATA IDEA integrates and connects seamlessly with the following Data file formats: Microsoft Excel, Microsoft Access ASCII (Text) Print Report and Adobe PDF files XML SAP/AIS dBASE III and IV Lotus (.wk1, .wk3, .wk4) AS400 Proprietary Accounting Packages ODBC