James Bourke
James Bourke

Computer Assisted Audit Techniques or CAATS

What’s so great about it?

January 25, 2010
by James Bourke, CPA.CITP

Computer Assisted Audit Techniques (CAATS) or Computer Aided Audit Tools or Computer Assisted Audit Tools and Techniques (also sometimes referred to as CAATTs) are becoming more popular throughout our profession. Now more than ever before, these tools are being used throughout the industry to assist internal auditors in their search for irregularities in data files, to help internal accounting departments with more detailed analysis and to support the forensic accountant with extrapolating large amounts of data for further analysis and fraud detection.

Simply put, CAATS are used to simplify or automate the data analysis process. There is not a CPA firm today that does not use some form of CAATS on the traditional accounting and auditing engagement. It may be far-reaching, but the simple use of a computer on such engagement would be considered the use of CAATS. Firms that have taken the use of CAATS to the next level, have realized the many benefits of using these tools.

CAATS have also become synonymous with incorporating data analytics into the audit process.

Why Use CAATS?

Although CAATs have been around for years, accountants are finding it easier to use these techniques now to analyze large volumes of data for anomalies. And with advances in technology, it is simpler to obtain data files and have access to many of the improved tools on the market.

The average accountant no longer needs to know how to do computer programming to be able to identify, request and import the data for analysis. The accountant simply needs to be in a position to select the appropriate data files and then rely upon core skills to perform specific tests on that data.

Selecting the appropriate data file may sometimes be a little tricky. Generally, a meeting with the client, the client’s internal or external technology personnel and the addition of a Certified Information Technology Professional (CITP) credential holder to your audit team can definitely help with the appropriate data file identification process.

Once you obtain the appropriate data files and import them into your CAATS tool, it is time for the analytics. Many of the tools on the market today include automated routines that perform common queries. In addition to the “included” routines, CAATS user groups are pretty common and can be found all over the Internet. Also, don’t forget about the power of the Social Networking sites. Joining one or more of these user groups and/or participating in a shared interest community on a social networking site, will give you access to thousands of routines created and posted by fellow user group members.

Once a routine is created for your specific situation, the same routine can be run generally from year to year without investing any additional up-front time. Data file structures and audit procedures generally tend not vary much from year to year. Therefore, when links have been established between the routine and the data file, the task can be assign the subsequent year to less experienced members of the audit team.

There are many analysis techniques that may be performed using CAATS. Some of these techniques include the following:

Filter/Display Criteria Aging
Expressions/Equations Join/Relate
Gaps Trend Analysis
Statistical Analysis Regression Analysis
Duplicates Parallel Simulation
Sort/Index Benford’s Law
Summarization Matching
Stratification Combination of One or More

There is a tremendous amount of resources available to educate the end-user in applying the above techniques and demonstrating all of the additional ways that they can be used.

How AICPA Can Help

By joining the IT Section you’ll have access to a tremendous amount of content in this area. Content includes white papers, archived and future webinars, PowerPoint presentations, practice aids and more. For more information visit: http://infotech.aicpa.org.

As technology continues to change, putting more powerful processors into the hands of the end users and with the prevalence of more and more technologies in the business environment, there is no better time than the present to improve the efficiency of audit procedures by the addition of CAATs.

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James C. Bourke, CPA.CITP, CFF, is a partner at WithumSmith+Brown where he is director of Firm Technology. He is a past president of the New Jersey Society of CPAs and currently serves on AICPA Council and the Chair of the AICPA CITP Credential Committee. He was recently named one of the Top 100 Most Influential People in the Profession.