Most businesses and organizations have started incorporating information technology into their financial systems. These systems have become more efficient and effective as a result. Apart from financial systems, information technology is prevalent in all business areas. While this has made many processes much more simplistic, it has also introduced some challenges. One such challenge applies to auditors and their work.
Auditors deal with information in many different forms. Whether that information relates to accounting, assurance, compliance, or consulting, the form has become digital. Therefore, auditors need to adapt their system to incorporate this information. In the audit field, auditors can use computer assisted audit techniques to make the process simplistic.
What is Computer Assisted Audit Techniques?
Computer assisted audit techniques (CAATs) includes tools used by auditors during their work. These tools allow auditors to receive data in any form and analyze it better. CAATs includes various methods that can help auditors in many ways. For example, auditors can use them to identify trends or single out anomalies in the provided information. These tools are available for both external and internal audit uses.
In essence, computer-assisted audit techniques refer to the use of technology in auditing. Using these tools, auditors can assess several aspects of their audit engagement. Whether it is evaluating the client’s internal controls or extracting specific information, CAATs can be significantly valuable. While some people assume CAATs apply to large audits only, these tools are beneficial in any size audits.
Computer-assisted audit techniques have become beneficial in all audit fields. For example, these tools are common in forensic audits for complex analysis. CAATs can boost the productivity and efficiency of auditors. Traditionally, auditors spend most of their time analyzing data. With CAATs, they don’t have to take the same time. Instead, they can focus on other more prominent audit matters.
How do Computer Assisted Audit Techniques Work?
Computer assisted audit techniques can work in various ways. For example, auditors can introduce test data in the client’s financial systems. Using this, they can identify whether the system correctly processes it and detects any issues. However, that requires auditors to use the client’s systems instead of their own. Despite that, it does not imply that it is not effective to do so.
Auditors may also use their own audit software to analyze the client’s financial information. The software may include powerful tools that process information in a specific manner. With the relevance of big data, the use of such audit software has also become more prevalent. Auditors can also customize the process according to their audit objectives.
Two Common Types of Computer Assisted Audit Techniques
Computer assisted audit techniques include two common types. These are test data and audit software. Both of these combined constitute CAATs and their use in audit settings. Therefore, it is very important to understand what each of these is.
Test Data
The test data category of computer-assisted audit techniques includes auditors testing a client’s systems. With this approach, auditors usually enter fake information into the client’s systems. Usually, they do so in a controlled environment to ensure that it does not affect any other areas. This process aims to test the client’s internal controls within their information technology systems.
For example, auditors may enter transactions into the system that are above the predetermined limits. If this process goes through, auditors can conclude that the internal controls in place an inefficient. Through test controls, auditors can test the client’s controls in a more effective manner than other procedures. Most accounting software has controlled environments that make the process seamless.
Audit Software
When people think of computer-assisted audit techniques, they always think of audit software. Audit software is a category of CAAT which includes bespoke or generic software. Using these tools, auditors can process large volumes of data in a relatively short period. Traditionally, this process required auditors to do everything manually, which CAATs have optimized significantly.
Audit software may include the use of tools to analyze patterns or identify discrepancies. For example, auditors can use it to perform recalculations or cast schedules. These tools can significantly reduce the time it takes auditors to perform these procedures. They also allow auditors to test more items in a cost-effective manner.
Advantages of Computer Assisted Audit Techniques
Computer-assisted audit techniques can have several advantages. Some of its primary benefits include the following.
- CAATs allow auditors to save time and test more items.
- CAATs can help auditors conduct their audits in a more cost-effective manner.
- CAATs enable auditors more freedom with their work and focus on critical areas.
- CAATs let auditors collect more evidence and form better opinions regarding their clients.
Disadvantages of Computer Assisted Audit Techniques
Despite the CAATs provides some great advantages, there are also drawbacks to using this technique. Below are some of the disadvantages of the CAATs:
- Auditors may require the client’s permission to use CAATs.
- CAATs also need data in a specific format, which the client may not be able to provide.
- CAATs can be costly, particularly when auditors use bespoke tools.
- Auditors need to have sufficient knowledge to operate these tools.
Conclusion
The use of information technology has become prevalent in many business areas. For auditors, it has brought forward new tools, such as computer-assisted audit techniques. CAATs include tools that auditors can use during their audit process. These have two categories, including test controls and audit software. Furthermore, there are several advantages and disadvantages of CAATs, as mentioned above.
