Auditing Software That's the CAAT's Pajamas · procedures should be performed. Auditors still need...
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A&A buzz Auditing Software That's the CAAT's Pajamas BY JESSICA D. OFFER, CPA, WITHUMSMITH+BROWN T he technology industry is constantly evolving and, as a byproduct, it revolutionizes other industries - the accounting profession being one of them. In today's accounting profession, software has gained a growing presence in many firms' practices, especially in audit and attestation services. Software allows auditors to better collect, arrange and analyze data. Not only does software increase efficiencies, it also increases the effectiveness of procedures being performed and results in a more precise conclusion. There have been numerous advances in software which have helped auditors both plan and perform audits. Historically, audit files consisted of hundreds of pages, all held together in a briefcase or a "red rope." Software has reduced the need for paper and created a cloud storage space for audit files. Besides enhancing portability, this has also allowed for remote access by multiple users of the same files and the backup of data. One such software product is ProSystem fx Engagement (cchgroup.coml prosystemengagement). It allows a firm to create files for various clients in one central location. You can create files for different audit years (or even different types of engagements, such as quarterly reviews or tax engagements) for each client. Electronic workpapers increase standardization via indexing, accessibility and organization. Every auditor needs an audit program in his or her tool kit. Thomson Reuters' Checkpoint Tools for PPC (yourcheckpoint. thomsonreuters.comltools) provides accounting firms a solid template for audit programs and various correspondence. There are templates customized for specific industries or types of audits, such as not-for- profit single audits and HUD audits. This customization saves auditors time and helps them perform a more effective audit by having industry- and compliance-specific programs. Other companies have released more advanced templates for audit programs which offer further client- specific customization. One such template is Knowledge Coach by ProSystem fx (tax.cchgroup.coml knowledgecoach). Knowledge Coach generates an audit program based upon risk, which the auditor assesses by answering a variety of questions. While the templates are beneficial, the auditor still needs to assess risk and determine the procedures to be performed. This tool increases auditor efficiency and effectiveness, but it does not eliminate the need for auditor judgment. One specific type of software that can help accountants when they move from planning to fieldwork is CAAT (computer assisted audit techniques). CAAT allows auditors to better and more quickly identify, examine and red uce risk, therefore increasing profitability on engagements. However, auditors run the risk of relying too much on software, leading to possible errors. Although the ability to automate certainly has its benefits, CAAT does not replace the need for an experienced auditor's judgment. Case Ware International's IDEA Data Analysis and Extraction Software (caseware-idea.com) is one CAAT used by auditors today. Traditional auditing used to employ a sample- based approach, because auditing NEW JERSEY CPA· MAY· JUNE 2012 20 100 percent of a population, without technology, was virtually impossible. In certain instances, IDEA now allows an auditor to analyze 100 percent of a population. The downside of testing an entire population, however, is increased risk of false errors. IDEA has built-in analyses that can help auditors perform a variety of procedures to evaluate management's assertions. IDEA allows auditors to test for duplicates, gaps (missing items in a sequence), compare multiple reports with a common field, review data sets for anomalies (e.g., debit balances within liability accounts, I transactions posted on a weekend) I and much more. IDEA also has account-balance-specific analyses for areas such as accounts receivable, inventory and the all-encompassing general ledger. While IDEA and the other accounting software products provide auditors a multitude of tools to increase efficiency and audit effectiveness, it is up to the auditor to assess risk and determine which procedures should be performed. Auditors still need to understand the purpose for their procedures and what they are trying to achieve in order to assess the software analysis' results. CAAT is not a total savior, but it certainly is a blessing for auditors everywhere . .., Jessica D. Offer, CPA, is a senior accountant at WithumSmith+Brown. She is a member of the New Jersey Society of ePAs Accounting & Auditing Standards and Federal Taxation interest groups. Contact her at joffer@ withum.com or 908-526-6363. •
Transcript of Auditing Software That's the CAAT's Pajamas · procedures should be performed. Auditors still need...
AampA buzz
Auditing Software Thats the CAATs Pajamas BY JESSICA D OFFER CPA WITHUMSMITH+BROWN
The technology industry is constantly evolving and as a
byproduct it revolutionizes other industries - the accounting profession being one of them In todays accounting profession software has gained a growing presence in many firms practices especially in audit and attestation services Software allows auditors to better collect arrange and analyze data Not only does software increase efficiencies it also increases the effectiveness of procedures being performed and results in a more precise conclusion
There have been numerous advances in software which have helped auditors both plan and perform audits Historically audit files consisted of hundreds of pages all held together in a briefcase or a red rope Software has reduced the need for paper and created a cloud storage space for audit files Besides enhancing portability this has also allowed for remote access by multiple users of the same files and the backup of data One such software product is ProSystem fx Engagement (cchgroupcoml prosystemengagement) It allows a firm to create files for various clients in one central location You can create files for different audit years (or even different types of engagements such as quarterly reviews or tax engagements) for each client Electronic workpapers increase standardization via indexing accessibility and organization
Every auditor needs an audit program in his or her tool kit Thomson Reuters Checkpoint Tools for PPC (yourcheckpoint thomsonreuterscomltools) provides accounting firms a solid template for audit programs and various
correspondence There are templates customized for specific industries or types of audits such as not-forshyprofit single audits and HUD audits This customization saves auditors time and helps them perform a more effective audit by having industry- and compliance-specific programs
Other companies have released more advanced templates for audit programs which offer further clientshyspecific customization One such template is Knowledge Coach by ProSystem fx (taxcchgroupcoml knowledgecoach) Knowledge Coach generates an audit program based upon risk which the auditor assesses by answering a variety of questions While the templates are beneficial the auditor still needs to assess risk and determine the procedures to be performed This tool increases auditor efficiency and effectiveness but it does not eliminate the need for auditor judgment
One specific type of software that can help accountants when they move from planning to fieldwork is CAAT (computer assisted audit techniques) CAAT allows auditors to better and more quickly identify examine and red uce risk therefore increasing profitability on engagements However auditors run the risk of relying too much on software leading to possible errors Although the ability to automate certainly has its benefits CAAT does not replace the need for an experienced auditors judgment
Case Ware Internationals IDEA Data Analysis and Extraction Software (caseware-ideacom) is one CAAT used by auditors today Traditional auditing used to employ a sampleshybased approach because auditing
NEW JERSEY CPAmiddot MAYmiddot JUNE 2012
20
100 percent of a population without technology was virtually impossible In certain instances IDEA now allows an auditor to analyze 100 percent of a population The downside of testing an entire population however is increased risk of false errors
IDEA has built-in analyses that can help auditors perform a variety of procedures to evaluate managements assertions IDEA allows auditors to test for duplicates gaps (missing items in a sequence) compare multiple reports with a common field review data sets for anomalies (eg debit balances within liability accounts
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I transactions posted on a weekend) I and much more IDEA also has account-balance-specific analyses for areas such as accounts receivable inventory and the all-encompassing general ledger
While IDEA and the other accounting software products provide auditors a multitude of tools to increase efficiency and audit effectiveness it is up to the auditor to assess risk and determine which procedures should be performed Auditors still need to understand the purpose for their procedures and what they are trying to achieve in order to assess the software analysis results CAAT is not a total savior but it certainly is a blessing for auditors everywhere
Jessica D Offer CPA is a senior accountant at WithumSmith+Brown She is a member of the New Jersey Society of ePAs Accounting amp Auditing Standards and Federal Taxation interest groups Contact her at joffer withumcom or 908-526-6363
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