Auditing: Internal Control and Audit

Topics: Internal control, Audit, Computer Pages: 12 (3171 words) Published: September 6, 2013
Using Computer-Assisted Audit Techniques to Support Audit

I. Executive Summary

Nowadays, the use of computers dominates in most of the business world; auditors too have recognized that the power and speed of computers can greatly assist them in their work. The term “computer-assisted audit techniques” (CAAT) is used to denote computer techniques that auditors can utilize to help them complete their audits in a more effective, efficient, and timely manner. Use of the prefix “computer-assisted” seems to suggest that an auditor’s use of a CAAT is unusual; in other words, the techniques normally used by an auditor are not computer-assisted. However, since today almost all business processes in large and medium-sized business enterprises are computer-based, use of computers in the performance of audits hardly seems to be an option and will eventually be assumed; the prefix “computer-assisted” will be omitted.

The purpose of this paper is to provide information about CAATs. This paper describes CAATs, compares CAATs to traditional audit procedures, and discusses the costs, risks, and benefits of using CAATs. The paper also discusses specific types of CAATs such as data analysis software, the test data technique, utility software and the audit-expert system. It also brings up issues that the auditor may encounter, suggests the recommendations to overcome the issues, and the barriers/ challenges when using CAATs.

II. Introduction

In general, the objective and scope of an audit do not change when it is conducted using a computer. The objective is still to determine if the financial statements issued by the management of a business accurately and adequately conform to generally accepted accounting principles, thereby presenting a true picture of the economic reality of the business. The concept of CAAT also is not new in the audit field. It implies the utilization of information technology resources in the auditing procedures to achieve its desired objectives and scope. (

Furthermore, using CAAT is also encouraged by International Standards for the Professional Practice of Internal Auditing: Standard 1220.A2 – Due Professional Care
“In exercising due professional care the internal auditor should consider the use of computer-assisted audit tools and other data analysis techniques.”

III. Computer-Assisted Audit Techniques (CAAT)

A. What is CAAT?
Computer-Assisted Audit Techniques (CAATs) are computer programs and test data that the auditor uses as part of audit procedures in achieving the audit objectives. Tests of controls and detailed audit procedures can be performed using audit software that can access the client’s computerized systems. (

B. Compare CAATs to traditional audit procedures

B.1 Traditional Audit Procedures

In the early days of auditing, a proper audit was one which included a complete review of all accounting transactions. However, as large-scale business enterprises developed, auditors were forced to adopt a sampling technique. This new auditing technique transformed the audit process into one of making tests of randomly selected transactions rather than verifying all transactions. Traditional auditing is associated with conducting such sample testing in order to issue an opinion on the truth and fairness of the financial statements which summarize the transactions of a company.

Auditors also became aware of the importance of the system of internal control in making it possible for auditors to rely upon their sampling techniques. Evaluation of internal control became recognized as a prerequisite to successful use of sampling techniques; in general, the stronger the system of internal control, the less the amount of testing required by the auditor. So tests were devised on the internal...

References: - Guidance note on computer assisted audit techniques (CAATs). (2004). Retrieved November 7, 2012 from
- Computer assisted audit techniques (CAAT) (n.d). Retrieved November 1, 2012 from
- Arens, Elder, Beasley, Splettstoesser-Hogeterp. (2011). Auditing – The Art and Science of Assurance Engagements, Canadian 11th edition. Pearson Canada Inc.
- Tulvinschi, M., Iancu, E., Grosu, V. (2007). Computer Assisted Audit Techniques. Journal of Applied Computer Science, 2(1), 1843-104
- Lacoma, T. (n.d). Advantages and disadvantages to an assisted audit. Retrieved November 1, 2012 from
- Specific aspects of auditing in a computer-based environment. (2011). Retrieved November 7, 2012 from
- Integrated test facility (ITF) (n.d). Retrieved November 7, 2012 from
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