Chapter 12/2 Audit Software Techniques Dr. Mohamed A. Hamada

Audit Software Techniques Information technology gives auditors a new set of techniques for examining the automated business environment, Audit software provides auditors with the ability to extract information from several files, with different database management systems, in order to search for underlying patterns or relationships among data. Audit software is computer programs that help auditors achieve the various tasks of auditing process.

Computer Assisted Audit Techniques (CAATs), Consist of package of programs; purpose written programs, utility programs or system management programs • Generalized Audit Software (GAS) • Test data • Integrated Test Facilities (ITF) • Parallel Simulation • Snapshot • Mapping • Embedded audit module EAM

A. Review of Systems Documentation The auditor reviews documentation such as narrative descriptions, flowcharts, and program listings. In desk checking the auditor processes test or real data through the program logic.

B. Test Data The auditor prepares input containing both valid and invalid data. Prior to processing the test data, the input is manually processed to determine what the output should look like. The auditor then compares the computer-processed output with the manually processed results.

Illustration of Test Data Approach Computer Operations Auditors Prepare Test Transactions And Results Transaction Test Data Computer Application System Manually Processed Results Computer Output Auditor Compares

Test Data Approach 1. Test data should include all relevant conditions that the auditor wants tested. 2. Application programs tested by the auditors’ test data must be the same as those the client used throughout the year. 3. Test data must be eliminated from the client’s records.

Test Data Approach Input test transactions to test key control procedures Master files Application programs (assume batch system) Transaction files (contaminated?) Contaminated master files Control test results

Test Data Approach Control test results Auditor makes comparisons Auditor-predicted results of key control procedures based on an understanding of internal control Differences between actual outcome and predicted result

C. Integrated Test Facility (ITF) Approach A common form of an ITF is as follows: A dummy ITF center is created for the auditors. Auditors create transactions for controls they want to test. Working papers are created to show expected results from manually processed information. Auditor transactions are run with actual transactions. Auditors compare ITF results to working papers.

Illustration of ITF Approach Computer Operations Auditors Actual Transactions ITF Transactions Prepare ITF Transactions And Results Computer Application System Data Files ITF Data Reports With Only Actual Data Reports With Only ITF Data Manually Processed Results Auditor Compares

Parallel Simulation The auditor uses auditor-controlled software to perform parallel operations to the client’s software by using the same data files.

Parallel Simulation Production transactions Master file Auditor-prepared program Client application system programs Auditor results Client results Auditor makes comparisons between client’s application system output and the auditor-prepared program output Exception report noting differences

Illustration of Parallel Simulation Computer Operations Auditors Actual Transactions Computer Application System Auditor’s Simulation Program Actual Client Report Auditor Compares Auditor Simulation Report

Embedded Audit Module Approach Auditor inserts an audit module in the client’s application system to identify specific types of transactions. Embedded Audit Modules. EAMs are subroutines embedded in the client’s information system that perform control and audit procedures at the same time as the normal application processing

Example of EAMs : (Debreceny et, al., 2005) JOIN INVENTORY to SUPPLIER, PURCHASES SELECT supplier ID, [(purchase Price- standard Price) purchase Volume] FROM INVENTORY-SUPPLIER-PURCHASES IF purchase Price/standard Price > 1.05 OR purchase Price/standard Price < 0.95 RUN E-mail trigger

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