Computer Assisted Audit Techniques. WinIDEA solely 1). 2). Some or most of us have been using this technique one way or the other 3). It could be very

Computer Assisted Audit Techniques


WinIDEA solely1).

2). Some or most of us havebeen using this techniqueone way or the other

3). It could be very simple


Computer Assisted Audit Techniquesis

meaning

We use computer to perform partof our auditing functions

They are tools to be used by the examiners,NOT a means to an end

Need to first identify the objectives of auditthen look at best method of achieving it

Prime objective should be to assist inperforming audit in the most effectiveand efficient manner



Considerations

Importance of the system to the organisation

Whether the review is a one-off or acontinuing one

Time and cost to set up the technique

Time and cost to maintain the technique

Level of audit assurance required

Expected life of the system


Types of CAATs

Interogation SoftwareEmbedded Audit ModuleParallel simulationTest DataIntegrated Test Facility Specialised audit softwareCommercial SoftwareUsing the auditee’s system & resources


Interogation Software

DefinitionAn audit interrogation program extracts data for subsequent audit reviewExamples:

Easytrieve ACLIDEAImpromptu/PowerPlay

Generalised audit software comes in a varietyof forms. It may either be a software packageavailable commercially or one developed by anauditing firm. In most cases the purpose of thesoftware package is to interrogate client’scomputer files and extract information therefrom.


This type of software may be used to gather evidence in relation to both the effectiveness ofoperations of a programmed controll procedureand the extent of misstatements in accounts andunderlying classes of transactions. In otherwords, this software may be used as either a test of control or as a substantive procedure.



Stages of Interogation

File Define the file to be interrogated

Field Determine the fields of interestSelection How data is to be collectedCriteria

Calc. OptionalOutput Most important aspect must get

output right to meet objectives


Independence form the IT department

More effective use of audit time

More Effective auditing

Training

Cost to set up and process

Flexibility through the use of parameters

Interogation Software (cont.)

Advantages


Disadvantages

Interogation Software (cont.)

Cost to purchase package

Inexperience

Does not review system controls

Computer Assisted Audit TechniquesEmbedded Audit Module

Definition

An audit program which is embedded

in the application system to extract

live data for subsequent audit review

* Automating part of the the audit function


It is a CAAT in which code prepared by the auditor is embedded in the client’s software.The code may be designed, for example, toreplicate specific aspect of control procedure,or to record details of certain transactions ina file accessible only to the auditor. Thus, it may be used as both a test of control* or as a substantive procedure

Embedded Audit Module (cont.)


Advantages

Concurrent auditing

Continuous monitoring of transaction

Reduces need for separate audit runs

Particularly useful for very large files

Extracts unusual transactions for subsequent

audit checking

Computer Assisted Audit TechniquesDisadvantages

Must be included at system specification timeLoss of independence as usually programmedby IT staff

High set up and maintenance costs

Program maintenance difficult, needs regular review

Processing overheads may be high

To be effective must assign audit staff to follow upKnowledge of testinging criteria may lead tocircumvention


Definition

Parallel simulation

Live data is processed through the application

system and checked to pre-determined results.

lnvolves auditors developing either part or all

the system and then processing data through to

compare with output from original system.


Alternatively, actual client data is processedusing a copy of the client’s software that hasundergone program code analysis by theauditor and is under the control of theauditor. It provides evidence as to theeffectiveness of design of program controlprocedures.

Parallel simulation (cont.)


Advantages

Simple and positive verification of specific

programs and program controls

Simple verification fo the integrity of data

Uses live data files but does not corrupt them

Repeatable test

Can check all or part of a system

Computer Assisted Audit TechniquesDisadvantages

May require considerable programmingknowledge

Need detailed knowledge of application system

Expensive to maintain

Need good application documentation

Are error caused by faults in live orparallel system?

Computer Assisted Audit TechniquesTest Data

Definition

Test data is processed through the application system and checked to pre-determined results.

INTEGRATED TEST FACILITY is an enhanced form of this

May use TEST DATA GENERATOR Pansophic’s PANAUDIT.


Test data is a CAAT in which test data prepared by the auditor is processed onthe current production version of the client’s software, but separately form the client’s normal input data. The test datathat is processed updates the auditor’s copiesof the client’s data files. It is typically used to gather evidences as to the effectiveness ofdesign of programmed control procedures.


Advantages

Does not interfere with live processing

Enables the auditor to carry out more

exhaustive testing


Disadvantages

Computer staff assistance required

Additional computer resources required

No assurance that the test data followed

normal processing procedures

Computer Assisted Audit TechniquesIntegrated Test Facility

ITF is a facility forming part of the client’ssoftware that enables the auditor’s test datato be integrated with the client’s live input data and then processed using the client’scurrent production version of the software.The facility ensures that the test data updatesspecial dummy files, rather than actual operating files. This procedure provides evidence of the effectiveness of design ofprogrammed control procedures.

Computer Assisted Audit TechniquesSpecialised audit software

It is software designed to perform specific tasks in specific circumstances, such ascomparison of source and object code, the analysis of unexecuted code and the generationof test data. It is used to gather evidence asto the design effectiveness of client’s software.

• Standard software to audit operating software or applications– Webtrend– Security module


Commercial Software

Such as Microsoft Excel, .., may be used bythe auditor for analysing data imported fromclient files, writing audit program, etc.

e.g.Stress Test is perform on ExcelBreakeven Test (RWCR & NPL)


Using the auditee’s system & resources Its application system

Its query tools

Its programmer

Need to ask for a user-id with “read only”capabilityNeed to understand the productNeed to understand the system (command) Need system documentation Start with login & exit the application


Using the auditee’s application system


Using the auditee’s query tools (very muchlike WinIdea)

Need to ask for a user-id with “read only”capability & full assess to query toolNeed to understand the query tool e.gQuery/400, SQL, Crystal report,... Need system documentation Start with login & exit the application Begin extraction with the simplest query


Using their programmer (smart partnership)

Need co-operation

Must understand system flows & file structure

Must know what you want & clearly communicated to the programmer

Should review source code (program)

Could submit/run the subsequent requests byyourself.

Documents

Computer Assisted Audit Techniques. WinIDEA solely 1). 2). Some or most of us have been using this technique one way or the other 3). It could be very