The document discusses Computer Assisted Audit Techniques (CAAT). It defines CAAT as using computers to automate accounting and audit processes. CAAT allows auditors to do more work in less time and provide more robust assurance. The document outlines planning steps for CAAT, types of audit evidence that can be obtained through CAAT, and audit techniques like snapshots, integrated test facilities, and embedded audit facilities. It also discusses audit sampling methods and provides an example of using IDEA software to detect duplicate invoices.

1. CAAT – DATA ANALYSIS AND AUDIT
TECHNIQUES
Submitted By:- Submitted To:-
Name - Saurabh Rai Mr. XXXX
Roll No. – XX
Batch No. – ADV - XX
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2. DECLARATION
I Saurabh Rai, hereby declare that the project titled “CAAT – Data Analysis and Audit
Techniques” is my original piece of work and is based on my understanding of the subject. It has
not been copied from any fellow trainees. I have prepared this project under the guidance and
supervision of my mentor Mr. Mahesh Prasad.
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3. ACKNOWLEDGMENT
At the outset, I would like to thank the INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
(ICAI) for organizing this course which served as a vibrant platform for learning the dynamic area
of computers relevant to us as future Chartered Accountants.
I would also acknowledge my gratitude to XXXX Sir for his lectures, guidance and valuable advice
throughout the course.
Also I would record my gratitude to my parents, friends and fellow trainees who are with me
during all successes and failures.
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4. CONTENTS
1. What is Computer Assisted Audit
Techniques (CAAT)
2. Define : Data analysis and Audit
Techniques
3. Why CAAT?
4. Key factors to be considered using
CAAT
o Advantages of CAAT
o Disadvantages of CAAT
5. Planning Steps in CAAT
6. Documentation in CAAT
7. Audit evidence and CAAT
8. Audit Test using CAAT
9. Audit Techniques for CAAT
o Snapshot
o Integrated Test Facility (ITF)
oSystem Activity File Interrogation
oEmbedded Audit Facilities
10. Audit Sampling
o Random Sampling
o Systematic Sampling
o Haphazard Sampling
o Judgmental Sampling
11. Illustration (IDEA)
12. Conclusion
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5. WHAT IS COMPUTER ASSISTED AUDIT
TECHNIQUES (CAAT)
• CAATs is the practice of using computers to automate the accounting and audit processes.
• CAAT enables auditor to do more work within less time and add value through the assurance
process which is more robust and comprehensive.
• CAATs normally includes using basic office productivity
software such as spreadsheet, word processors and text
editing programs and more advanced software packages
which involves use of statistical analysis and business
intelligence tools.
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6. DEFINE : DATA ANALYSIS AND AUDIT
TECHNIQUES
Data Analysis
Data analysis is the process of transforming raw data into usable information, suggesting
conclusions, and supporting decision-making. Data from various sources is gathered, reviewed,
and then analysed to form some sort of finding or conclusion.
Audit Techniques
Audit techniques are tools, methods or processes by means of which an auditor collects
necessary evidence to support his opinion in respect of the propositions or assertions submitted
by the client to him for his examination.
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7. WHY CAAT? (NEED)
• With the increasing use of information technology by business entities for recording,
transaction and their processing, the need for the auditor to utilize tools to adequately assess
risk become an integral part of audit coverage.
• CAAT serves an important tool for auditor to evaluate the control environment in an efficient
and effective manner.
• CAAT is used in performing various audit procedures such as:-
o Analytical Review Procedure (ARP)
o Compliance test of general controls
o Tests of details of transaction and balances.
o Compliance test of application controls.
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8. KEY FACTORS TO BE CONSIDERED USING CAAT
The key factors which needs to be considered by IS auditor along with manual techniques are as
follows:-
• Availability of suitable CAATs and IS facilities.
• Efficiency and effectiveness of using CAATs over manual techniques.
• Computer Knowledge, expertise and experience required.
• Time constraints.
• Level of audit risk.
• Integrity of information system and IT environment.
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9. ADVANTAGES OF CAAT
• Examination of data is more rapid.
• Examination of data is more accurate
• It is the only practical method of examining large amounts of data.
• Provides new opportunities to the auditor i.e. access to tapped data.
• It has surprise test capability.
• Provides information to system staff on meeting of objectives.
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10. DISADVANTAGES OF CAAT
• Can be expensive to set up or acquire.
• Technical and expertise knowledge is required.
• Ineffective in case where audit trail is available and cost of error is less.
• Standard computer audit programs may not be compatible.
• Can be used where application software is stable i.e. not changed frequently.
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11. PLANNING STEPS IN CAAT
Following steps must be considered by auditor in preparing the application of selected CAAT’s :-
• Set audit objectives of CAAT’s align with terms of reference of exercise.
• Determine the accessibility and availability of the organization’s IS facilities, programs/systems and data.
• Clearly understand composition of data to be processed including quantity, type, format and layout.
• Define the procedures to be undertaken (e.g., statistical sampling, recalculation, confirmation).
• Define output requirements.
• Determine resource requirements, i.e., personnel, CAATs, processing environment (the organization’s IS
facilities or audit IS facilities).
• Obtain access to the organization’s IS facilities, programs/systems and data, including file definitions.
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12. DOCUMENTATION IN CAAT
• According to SA – 230, Audit documentation refers to record of audit procedures performed,
relevant audit evidence obtained, and conclusions the auditor reached (terms such as
“working papers” are also used). The objective of audit documentation is to record and
demonstrate the audit work from one year to another.
• The standard of working papers and retention procedures for a CAAT should be consistent
with that on the audit as a whole.
• The auditor is expected to keep the following documents relating to the stages enumerated
below, and his audit working papers should contain sufficient documentation to describe the
CAAT application, such as:
a. Planning
b. Execution
c. Audit Evidence
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13. AUDIT EVIDENCE AND CAAT
Audit is the process of collecting and evaluating audit evidence as per audit objectives. Based
on the scope and objectives of audit, auditor can obtain the audit evidence by:-
• Inspection
• Observation
• Inquiry and confirmation
• Re-performance
• Recalculation
• Computation
• Analytical procedures
• Other generally accepted methods
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14. AUDIT TEST USING CAAT
Audit Test using
CAAT
Inquiry and
Confirmation
Re-
performance
Re-calculation Computation
Analytical
Procedures
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Inquiry and Confirmation:
oIdentifying accounts for which external confirmation is to be obtained. Request letters for
confirmation of balances can be printed using CAAT software.
Re-performance:
oThe processing of transactions done by the application software can be re-performed and
the resultant data can be compared to verify correctness and completeness. For example:
Postings of transactions to personal ledger can be re-performed using the original
transaction data base and compared with classified transactions as per ledgers.
Re-calculation:
oAll the computations which were done electronically by the application software used in
the enterprise can be independently validated by re-performing the computations.
oFor example, Tax deducted at source or VAT charged on sales, interest computation, etc. can
be re-computed in CAAT software and validated with the computed totals from the original
application software to confirm correctness of processing of transactions.

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Computation:
o using CAAT software, it is possible to compute totals to confirm correctness.
o For example(1), the VAT payments made for the year can be total in CAAT software to
compare with the total payments as per VAT returns.
o For example(2), The interest debited can be computed and compared with actual debit to
interest a/c for the year.
Analytical procedures:
o Based on the data available in electronic format, various analytical procedures can be
performed by comparing and relating various aspects of financial and non-financial
information.

17. Audit Techniques for CAAT
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Audit
Techniques
for CAAT
Snapshot
System
Activity File
Interrogati
on
Embedded
Audit
Facilities
Integrated
Test
Facility
(ITF)

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Snapshot :
o Snapshots are digital pictures of procedures of the console that are saved and stored in the
memory. Procedures of the console refer to the application procedures that take input from
the console i.e. from the keyboard or the mouse. These procedures serve as references for
subsequent output generations in the future.
o Snapshots are means through which each step of data processing is stored and recalled.
Integrated Test Facility (ITF):
o Integrated Test Facility (ITF) is a system in which a test pack is pushed through the
production system affecting “dummy” entities. Hence this requires dummy entities to be
created in the production software. For ex, the auditor would introduce test transactions
that affect targeting dummy customer accounts and dummy items created earlier for this
testing purpose. The approach could also involve setting a separate dummy organisation
using the application software in the live environment.
o ITF is useful in identifying errors and problems that occur in the live environment and that
cannot be traced in the test environment.

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System Activity File Interrogation:
o Most computer operating systems provide the capability of producing a log of every event
occurring in the system, both user and computer initiated. This information is usually
written to a file and can be printed out periodically.
o Similar implementation is also possible by embedding special audit software in application
software that maintains continuous transaction logs at various points in the application
software. This technique is also referred to as the Systems Control Audit Review File. The
files can be further analysed to determine deviations and improper transactions.
Embedded Audit Facilities:
o Embedded audit facilities consist of program audit procedures, which are inserted into the
client’s application programs and executed simultaneously.
o The technique helps review transactions as they are processed and select items according to
audit criteria specified in the resident code, and automatically write details of these items to
an output file for subsequent audit examination.

20. Audit Sampling
Random Sampling Haphazard Sampling
Systematic Sampling Judgmental Sampling
Audit Sampling
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StatisticalSampling
Non-StatisticalSampling

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Statistical Sampling Methods
Random Sampling:
o Random Sampling ensures that all combinations of sampling units in the population have an
equal chance of selection.
o An example of a simple random sample would be the names of 25 employees being chosen
out of a hat from a company of 250 employees.
Systematic Sampling:
o Systematic sampling is a type of probability sampling method in which sample members
from a larger population are selected according to a random starting point and a fixed
periodic interval.
o This method systematically weights the selection in favour of the larger amounts but still
gives every monetary value an equal opportunity for selection.

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Non-Statistical Sampling Methods
Haphazard Sampling:
o The IS Auditor selects the sample without following a structured technique, while avoiding
any conscious bias or predictability
o However, analysis of haphazard sample should not be relied upon to form a conclusion on
the population.
Judgmental Sampling:
o The IS auditor places a bias (preference) on the sample.
o It should be noted that judgmental sample is not statistically based and results should not
be based over the population as the sample is unlikely to be representative of the
population.

23. ILLUSTRATION (IDEA)
Problem:-
a) To Test the validity of invoices.
b) To Test for duplicate invoice numbers.
Solution:-
IDEA has two key functions to identify exceptions, irregularities and errors.
These are: Duplicate Detection and Gap Detection.
These functions assist the user to examine large volumes of data and help identify specific
duplicate entries or specific missing entries. These also help the user obtain an assurance on all
data reviewed by it.
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Step by Step Procedure for Duplicate
Ensure that Sales Transaction-Sales Trans is the active database.
1) Analysis > Duplicate Key > Detection

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2) The Duplicate Key Detection dialog box appears.
3) Leave the output Duplicate records option selected.
4) Click Fields and select INVOICENO, INVDATE and USERID.

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5) Click Key. The Define Key Dialog box appears.
6) In the Field Column, select INVOICENO and leave the direction as Ascending.
7) Click OK to return to the Duplicate Key Detection dialog box.
8) In the File name box, enter Duplicate.
9) Click OK to run the task.

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Duplicate Result
a)In the resultant database of 8 transactions with DATE, INVOICENO and USERID duplicate
values are investigated.
b)Duplicate file is opened as current active database.
c)The given result is sorted based on INVOICENO field in ascending direction.

28. CONCLUSION
Auditors can take advantage of CAATs to improve efficiency and
effectiveness of the audit. With the right data analysis tools, training
and methodology, CAAT-Enabled Auditing can help speed up the
audit process, and provide access to data that would otherwise
remain untapped.
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29. SEEK EXCELLENCE & SUCCESS WILL FOLLOW
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Thank You…..