Page 132 - CITP Review

There are numerous ways to use CAATs in an audit or review. The CITP could use CAATS to check
automated controls by reperforming edit checks, matching, and other controls or business processes.
Then, based on the results, the CITP can draw an inference about the effectiveness of automated
controls and business processes. If no errors exist in the results, then controls were working effectively —
because tests included 100% of transactions — and we can infer that they were effective throughout the
period under review or audit. On the other hand, if a large number of exceptions are identified, controls
are likely to be deficient.

CAATs are also helpful in gathering evidence related to the relevant assertions for material account
balances, classes of transactions, or disclosures, as in the following examples:

 Technical accuracy and valuation assertions. Total records in a file, recalculate totals in a file, prove
accuracy of calculations, aging (debt, AR, AP, reperform automated calculations).
 Existence and validity assertions. Exception testing to identify unusual items and anomalies (for
example, a relationship between two data sets that do not correlate correctly).

CAATs — Techniques
The following is an illustrative list of possible techniques:

 Compare or combine data from different sources
 Compare or combine financial and nonfinancial data
 Duplicates testing: payments, inventory sold, issued, or received, payroll checks
 Gaps testing: AR, sales invoices, checks, inventory tickets
 Matching: cross check a master file with its transaction file (for example, vendors to disbursements,
employees to payroll checks)
 Use of other commands within the tool (for example, classify or group, Benford’s Law, and so on)
 Statistical sampling
 Cutoff: year-end GL and JE, inventory transactions, test for dates or sequence numbers at year-end

CAATs are also useful in examining thresholds and cutoffs associated with approvals. Approval levels
include purchase orders, dual approval, and check approval. The process would include a test of data just
below an approval threshold to recognize the abuse of approval level or test data for leading digit
anomalies (both to identify excessive number of transactions just below the approval level).

CAATs are beneficial when certain analyses are needed. For example, risky transactions and anomalies
might be identified with the use of the stratification technique. Trend analysis is another useful technique
to identify anomalies, and is especially useful in fraud detection.

CAATs — Tools
CAAT tools are available in a wide variety of technologies and software packages. They provide
technology for data extraction, data mining, and data analysis. CAAT tools can be classified as simple or
sophisticated:

 The simple tools include technologies such as database queries, database report writers, electronic
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spreadsheets, and spreadsheet plugins . Simple tools are useful for small data sets and simple

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Plug-ins are tools that become embedded with the host technology, usually as a menu option. Active Data is one
such example, and is designed for Excel; it becomes part of Excel as a menu or tab option.

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