Caat

[equity7]

Hi there!
Please do let me know how to answer question 1 for paper F8 which may include CAAT with audit procedures?Anty tips,advice,examples and so on will be of great help.:eek:
Thanks.
Regards,
Ron

[Vanessa]

Thanks for your question – you are right – the first question is likely to be a little tricky and may include CAATs. I hope you find the following attachment helpful.

[equity7]

Dear Sir,
Thanks for the attachment.What is the difference between test data and audit software.How do I use these tools in answering questions?What if questions asked about using test data or audit software in dealing in audit procedures?Please do urgently help.
Thanks.
Regards,
Ron

[Vanessa]

Test data is data generated by the auditor in order to test processing logic, calculations and controls actually programmed in computer applications.

However, selection of the audit sample an d the substantive procedures that an auditor performs while conducting an audit of various types of account balances will be performed largely with the help of audit software.

The following examples show how the audit software and test data can be used by the auditor in the area of receivables:

(i) An example of how the Audit software in the area of receivables would help the auditors are as follows:

Audit software in the area of receivables may help in

 selecting a sample for circularisation, or for sales procedure testing
 preparing letters for circularisation
 recalculating ageing analysis
 verifying subsequent collections
 selecting all receivables items over a certain amount
 reordering receivables ledger by size of balances
 comparing sales invoices, collections and other transactions with sales ledger to check whether all the items have been recorded in the ledgers calculating receivable days for each customer, i.e. how many days’ equivalent of average sales is outstanding.

(ii) An example of how the test data in the area of receivables would help the auditors are as follows:

Test data could be the data that tests the ability of the system e.g. it may cover whether the system correctly:

 identifies when a customer’s account balance exceeds the credit limits (his outstanding balance should be within this limit) i.e. The data must include customers balances which exceed the credit limits. The system must be tested to find out whether it identifies the balances which exceed the credit balances.
 allows dispatch of goods only after it has been authorised by a specified person
 tracks when an invoice becomes overdue
 calculates interest on delayed payments
 records all the sales at correct dates (dates of dispatch)
 records discounts only after approvals
 calculates balances
 carries out ageing analysis

From the above example you can understand how the two concepts can be used by you for answering the question.

For more example you may refer to our book F8- Audit and Assurance pages E5.5 to E5.10.

[equity7]

Dear Sir,
Thanks for reply to my query.Unfortunately I am not using getthroughguides,so I don,t have access to other examples on CAAT.PLEASE DO PROVIDE EXAMPLE OF CAAT BEING USED IN WAGES AND SALES SYSTEM
THANKS.
REgards,
Ron

[Vanessa]

An example of how CAAT can be used in the area of salary and payroll is as follows:

In the payroll model, for the field of age of employees, a system may have a check that if it is below the minimum (e.g. 18 years) or exceeds a certain number (e.g. 100 years); the system should flash a signal and record an exception. The test data in this case should include the ages below 18 years and above 100 years.

I suggest that you read the F8 book published by GTG for more examples.