Computer Aided Audit Techniques

Computer Aided Audit Techniques

What is a Computer Assisted Audit?

Audit functions formerly performed manually are now performed using stan- dard financial accounting software, modified as necessary for a particular system. Generally, much of the same information is requested and analyzed as in a traditional audit. Once verified using computer techniques, data is retained so it can be used in other areas of the audit including  error identi- fication and segregation of transactions within accounts. Customized re- ports are generated by computer and a standard audit trail is maintained.

What advantages  does the use of CAATS have over a traditional audit?

Most importantly, it saves time for you and DOR with no loss of quality or accuracy. Secondly, by analyzing data and generating specific reports using a standard program, data analysis is focused and allows for any future adjustment to be made with minimal effort. Thirdly, preliminary data can often be analyzed early in the audit process and a more efficient audit plan can be devised earlier.

Specific Areas in which CAATS Is Useful:

Computer Assisted Sampling. This permits the use of random statisti- cal sampling, which tends to be more accurate and saves time in those instances in which it is appropriate (see FAQ section for details).

File Management:.

Files are combined, compared, managed, segregated and ordered automatically using generally accepted computerized file man- agement. Adjustments or other changes to data and reports are easily ac- complished.  The DOR auditor will review your accounts in order to request specific information from your records essential to the audit.

Report Generation:.
Once data integrity is verified, the auditor can pro- duce various reliable reports from the overall data population.

Does the use of CAATS affect any other aspect of the audit process?

Generally, no. The use of Computer Assisted Audit Techniques automates what was previously done manually.

Is the use of CAATS restricted to “transaction” or “trustee” type taxes (Sales/Use Tax; Sales Tax on Meals; Income Tax Withholding; etc.)?

No. It can be used to reconcile accounts, analyze data and select various aspects of any type of computerized records which the auditor and taxpayer find useful to complete any tax audit.

Will my entire audit use CAATS?

Not necessarily. You and the auditor will determine which parts of your audit are best performed using CAATS.

What is Computer Assisted Random Sampling?

Transactions that occurred throughout the audit period are sampled instead of choosing a “block”  of transactions during specific time periods. Com- posite data is analyzed and stratified to create sets of transactions called stratum. Data is stratified so that individual  transactions relate directly in importance to the entire population. Standard scientific sampling tech- niques are employed, consistent with Generally Accepted Accounting Principles, to derive a sample population of the strata. Transactions are selected on a random basis throughout  each stratum. The result is a

sample that represents all the transactions within audit population.

We do not retain paper transaction records. In some cases, our records to be sampled are “book entries” only. Does this mean Computer Assisted Sampling can’t be used?

No.  Multiple  computerized methods can be used  during your audit.

We changed our computerized bookkeeping and accounting systems during the audit period. Does that mean we can’t use CAATS?

No. In this situation, we may use two separate analyses and simply  com-

bine them to produce the audit result.

May I discuss CAATS with my accountant or other representative before the audit begins?

Yes. You will be provided ample time to discuss this with anyone of your choosing  prior to your audit. 

Will I receive copies of audit documents and work papers as before?

Yes. You may prefer to receive them in a computerized format (DVD, CD), or you can request a “hard copy” format. 

Can I transmit and receive data using the Internet and/or e-mail?

Usually yes; however, to maintain the integrity of your computer systems and ours we have specific requirements that must be adhered to if data is to be transmitted via the Internet. Request additional  information  from your auditor.

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