What are CAATS? - Definition & Use

Instructor: Bryant Trombly

Bryant has taught graduate finance and has an MBA and master's degree in information technology.

In this lesson you will learn about Computer Assisted Audit Techniques and how modern auditors can use them to execute much more comprehensive and insightful analyses and reporting.

What is CAATs?

Say you are an auditor with limited time and large amounts of data. How can you be sure that the reports you're relying on are detailed and accurate? What's the best way to uncover control or process weaknesses that traditional auditing techniques may miss? The answer to all of these questions is by employing Computer Assisted Audit Techniques or CAATs, which provide auditors with many advantageous over traditional auditing techniques. These include:

  • A comprehensive approach of testing, as the entire population of data can be tested instead of just a sample.
  • Filtering of data in large volumes to identify instances of financial leakage, policy noncompliance, and mistakes or errors in data processing.
  • Continuous monitoring to identify and respond to operational risk, relieving auditors of tedious manual activities.

Note that the 'T' in CAATS is referred to as Tools in some sources, but we will use Techniques here.

The Advantages of CAATs

Using CAATs when conducting audit activities has benefits for auditors and management alike. Auditors can process more data and be more confident in the results and reports than ever. This leads to better insights and abilities when it comes to detecting inconsistencies or compliance risks.

Management can be more confident in the data that they receive and report and also enjoy the benefit of lowering the number of auditors needed and the person-hours involved in conducting the audit activities. These benefits lower cost overall.

CAATs also help address the increased oversight and accountability demanded by legislation such as the Sarbanes-Oxley Act, a broad-spectrum set of regulations that grew out of the accounting scandals at Enron and other large companies in the early 2000s.

CAATs Tools and Usage

The real power to CAATs is found in the tools and programs that are used to implement them. There are many types of specialized software that can be used to employ CAATs. Some of the most common are Galvanize (formerly known as Audit Command Language or ACL) and IDEA. These tools are comprehensive platforms that combine specific computer languages with user-friendly software systems to create an all-in-one package for auditors to employ CAATs.

Both of these CAATs tools integrate with many commonly used data storage platforms such as SAP and SQL and automatically extract and format the data for use in the audit process. In doing so these tools are able to automatically generate reports and execute analysis' on information such as

  • accounts payable,
  • accounts receivable,
  • the general ledger,
  • inventory,

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