CATs provide 100% assurance

Effectiveness refers to the extent we can rely on external controls.

Substantive testing is testing the validity and completeness of information.

GAS= Provides visual information.

Integrated test facilitated =
allows for real time using real time data.
Test controls are working as designed. Does it go through? Working as
intended?

Embedded audit modules =

To use audit modules or CATs within softwares (e.g. oracle)
Sit down with firm to ensure they have modules within software.
Similar to GAS software?
E.g. 5%-10% pay increase. Anything beyond will be flagged by the system.

Secondary types of CATS = Excel

WHERE CAN WE USE CATS?
Obtaining data from the business is very tricky.
Is it feasible to use CATs?
Use CATs on A/RS to confirm account balances. Check duplicate entries. Money
transferred to govt if inactive for too long. Checking aging schedule.
Steps in using CAT
Demonstrate to external auditors what internal auditors
How designing
How executing
Results?
External auditors will inspect, reperform?

Risks in using CATs

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Accounts Receivable
Group 1 : Aging Accuracy
Test Objective (audit Test of Controls GAS Data needed
objective)

To ensure that receivables are Run the GAS software to verify the AR of ledger with
aged accurately accuracy of the aging. customer balances

Group 2: Valuation

Test Objective Test of Controls GAS Data needed

(audit objective)

-Ensure the percentage is in line with the -Credit checks of the

prior year, with the industry customers
-Ensure A/R are aging properly -Aging schedule
-Ensure the percentage consistent with -Estimation of allowance
industry metrics and reasonable of doubtful account
perspectives

Group 3: Existence

Test Objective (audit Test of Controls GAS Data Required

objective)

Verify balances Integrated test facility - put through an Customer list

unusual A/R that is not suppose to be there A/R list
To make sure if the accounts to see if system if sorting/processing it Invoices
actual exist, identified properly A/R outstanding
customers (information is up amounts (aging)
to date) Cash receipts

Inventory
Group 4: Price Test

Test Objective (audit Test of Controls What data needed

objective) GAS

-Ensure the price of the product -run GAS to verify -Inventory database/per unit
is uniform with the product sold. inventory price is - Price of the products database
correct -recent sales data to understand
-Consider the write down of the if there should be write downs
inventory

Group 5: Slow moving Inventory- is product good for market

Test Objective Test of Controls GAS Data needed

(audit objective)

Check valuation of inventory and Inventory of sales

Valuation of possibility of write down data (date of which
inventory Check which inventories has not it was last sold)
pertaining to been sold for a long time
completeness Inventory Adjustment
Check the - Filter through the inventory adjustment listing Listing
necessary of write for inventory that has been sitting in -physical inventory
down warehouses for over 180 days. Assess count(inventory
probability of selling the inventory within the record vs. physical
Check what next 30 days, if not possible, impairment. stock)
products hasnt -time of purchasing
been sold recently. Program automatically codes input items as
complete; use GAS to import invoice numbers
and see if they were sequenced properly

Group 6 COGS V.S. Inventory Changes

Test Objective (audit Test of Controls GAS Data needed

objective)

Information is Check changes in inventory prices in Purchased inventory data.

transferred accurately different periods and review variations
and completely within and identify key patterns and trends.
the system in regards Identify any possible duplicate errors
to inventory updates within the transactions logs. Track
and cogs calculations. inventory changes within the
accounting system and that it is
updated in the cogs.
Need accounting records to
make sure what cogs is
made of. Accounting record
of cogs. Purchase orders.
Transaction logs of
inventory sold.