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Auditing Theory
Notes 10. Follow-up: ensure that the use of CAAT is properly controlled;
11. Arrange the administrative activities, including the necessary skills and computer facilities;
12. Reconcile data to be used for CAAT with the accounting and other records;
13. Execute CAAT application;
14 Evaluate the results;
15. Document CAATs to be used including objectives, high level flowcharts and run
instructions; and
16. Assess the effect of changes to the programs/system on the use of CAAT.
8.9.3 Techniques
Some of such techniques are mentioned below:
1. Test Data Approach:
(a) Under this approach auditor prepared transaction data (test data) is processed by the
client’s processing system under the control of auditor.
(b) The auditor plants certain errors in data along with correct transactions.
(c) The results of the processing are compared with the predetermined output by him.
(d) If errors are detected by the computer for follow up and corrections, this indicates
that all the application and general controls are functioning properly. Ideally, test
data should test each control on which auditor wishes to rely on.
(e) The major disadvantage of this approach relates to the difficulty in designing test
data. To prepare it, an auditor must be technical proficient in designing erroneous
data as well as data which can test each control. He should assure himself that the
programmes being tested are actually the same as used by the client.
2. Integrated Test Data Approach:
(a) Under integrated test data approach, the auditor creates a fictitious entity (e.g.
fictitious customer accounts, fictitious vendor accounts) within the client’s actual
data.
(b) Hypothetical data for fictitious transactions are, thus, integrated with actual client
data and processed. Subsequently, it is removed from records of the client by either
manually reversing journal entries or through programme commands and then
financial reports are complied.
(c) Advantages: provides assurance that the programmes being tested by the auditor,
have actually been used by the client, long term economies and can be precisely
targeted for specific procedures within the programmes.
(d) Disadvantages: difficult to ensure that fictitious transactions does not impact actual
results, errors, may be detected but well laid frauds difficult to detect and high
initial cost.
3. Generalized Audit Software (GAS): Under all the above approaches test data and integrated
test data an auditor is required to prepare input data or create programmes. In case of
generalized audit software, audit programmes are designed by computer manufacturers,
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