Transcript Chapter 7: Computer-Assisted Audit Techniques [CAATs] IT Auditing & Assurance, 2e, Hall &

Chapter 7:
Computer-Assisted Audit
Techniques [CAATs]
IT Auditing & Assurance, 2e, Hall &
IT Auditing & Assurance,
2e, Hall & Singleton
Singleton
INTRODUCTION TO INPUT
CONTROLS
 Designed to ensure that the transactions that bring
data into the system are valid, accurate, and
complete
 Data input procedures can be either:
 Source document-triggered (batch)
 Direct input (real-time)
 Source document input requires human
involvement and is prone to clerical errors.
 Direct input employs real-time editing techniques to
identify and correct errors immediately
IT Auditing & Assurance, 2e, Hall & Singleton
CLASSES OF INPUT
CONTROLS
1) Source document controls
2) Data coding controls
3) Batch controls
4) Validation controls
5) Input error correction
6) Generalized data input
systems
IT Auditing & Assurance, 2e, Hall & Singleton
#1-SOURCE DOCUMENT
CONTROLS
 Controls in systems using physical source
documents
 Source document fraud
 To control for exposure, control procedures
are needed over source documents to
account for each one
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Use pre-numbered source documents
Use source documents in sequence
Periodically audit source documents
IT Auditing & Assurance, 2e, Hall & Singleton
#2-DATA CODING CONTROLS
 Checks on data integrity during processing
 Transcription errors
 Addition errors, extra digits
 Truncation errors, digit removed
 Substitution errors, digit replaced
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Transposition errors
 Single transposition: adjacent digits transposed (reversed)
 Multiple transposition: non-adjacent digits are transposed
 Control = Check digits
 Added to code when created (suffix, prefix,
embedded)
 Sum of digits (ones): transcription errors only
 Modulus 11: different weights per column: transposition and
transcription errors
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Introduces storage and processing inefficiencies
IT Auditing & Assurance, 2e, Hall & Singleton
#3-BATCH CONTROLS
 Method for handling high volumes of
transaction data – esp. paper-fed IS
 Controls of batch continues thru all phases of
system and all processes (i.e., not JUST an
input control)
1) All records in the batch are processed together
2) No records are processed more than once
3) An audit trail is maintained from input to output
 Requires grouping of similar input transactions
IT Auditing & Assurance, 2e, Hall & Singleton
#3-BATCH CONTROLS
 Requires controlling batch throughout
 Batch transmittal sheet (batch control record)
– Figure 7-1, p. 302
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Unique batch number (serial #)
A batch date
A transaction code
Number of records in the batch
Total dollar value of financial field
Sum of unique non-financial field
• Hash total
• E.g., customer number
 Batch control log – Figure 7-3, p 303
 Hash totals
IT Auditing & Assurance, 2e, Hall & Singleton
#4-VALIDATION CONTROLS
 Intended to detect errors in data
before processing
 Most effective if performed close to
the source of the transaction
 Some require referencing a master
file
IT Auditing & Assurance, 2e, Hall & Singleton
#4-VALIDATION CONTROLS
 Field Interrogation
 Missing data checks
 Numeric-alphabetic data checks
 Zero-value checks
 Limit checks
 Range checks
 Validity checks
 Check digit
 Record Interrogation
 Reasonableness checks
 Sign checks
 Sequence checks
 File Interrogation
 Internal label checks (tape)
 Version checks
 Expiration date check
IT Auditing & Assurance, 2e, Hall & Singleton
#5-INPUT ERROR CORRECTION
 Batch – correct and resubmit
 Controls to make sure errors dealt with
completely and accurately
1) Immediate Correction
2) Create an Error File
 Reverse the effects of partially
processed, resubmit corrected records
 Reinsert corrected records in
processing stage where error was
detected
3) Reject the Entire Batch
IT Auditing & Assurance, 2e, Hall & Singleton
#6-GENERALIZED DATA INPUT
SYSTEMS (GDIS)
 Centralized procedures to manage data
input for all transaction processing
systems
 Eliminates need to create redundant
routines for each new application
 Advantages:
 Improves control by having one common
system perform all data validation
 Ensures each AIS application applies a
consistent standard of data validation
 Improves systems development efficiency
IT Auditing & Assurance, 2e, Hall & Singleton
#6-GDIS
 Major components:
1) Generalized Validation Module
2)
3)
4)
5)
Validated Data File
Error File
Error Reports
Transaction Log
IT Auditing & Assurance, 2e, Hall & Singleton
CLASSES OF PROCESSING
CONTROLS
1) Run-to-Run Controls
2) Operator Intervention
Controls
3) Audit Trail Controls
IT Auditing & Assurance, 2e, Hall & Singleton
#1-RUN-TO-RUN (BATCH)
 Use batch figures to monitor
the batch as it moves from
one process to another
1) Recalculate Control Totals
2) Check Transaction Codes
3) Sequence Checks
IT Auditing & Assurance, 2e, Hall & Singleton
#2-OPERATOR INTERVENTION
 When operator manually enters
controls into the system
 Preference is to derive by logic
or provided by system
IT Auditing & Assurance, 2e, Hall & Singleton
#3-AUDIT TRAIL CONTROLS
 Every transaction becomes traceable
from input to output
 Each processing step is documented
 Preservation is key to auditability of
AIS
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Transaction logs
Log of automatic transactions
Listing of automatic transactions
Unique transaction identifiers [s/n]
Error listing
IT Auditing & Assurance, 2e, Hall & Singleton
OUTPUT CONTROLS
 Ensure system output:
1)
2)
3)
4)
Not misplaced
Not misdirected
Not corrupted
Privacy policy not violated
 Batch systems more susceptible to exposure,
require greater controls

Controlling Batch Systems Output
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Many steps from printer to end user
Data control clerk check point
Unacceptable printing should be shredded
Cost/benefit basis for controls
Sensitivity of data drives levels of controls
IT Auditing & Assurance, 2e, Hall & Singleton
OUTPUT CONTROLS
 Output spooling – risks:
 Access the output file and change
critical data values
 Access the file and change the
number of copies to be printed
 Make a copy of the output file so
illegal output can be generated
 Destroy the output file before printing
take place
IT Auditing & Assurance, 2e, Hall & Singleton
OUTPUT CONTROLS
 Print Programs
 Operator Intervention:
1) Pausing the print program to load output paper
2) Entering parameters needed by the print run
3) Restarting the print run at a prescribed checkpoint
after a printer malfunction
4) Removing printer output from the printer for review
and distribution
 Print Program Controls
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Production of unauthorized copies
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Unauthorized browsing of sensitive data by
employees
 Employ output document controls similar to source document
controls
 Special multi-part paper that blocks certain fields
IT Auditing & Assurance, 2e, Hall & Singleton
OUTPUT CONTROLS
 Bursting
 Supervision
 Waste
 Proper disposal of aborted copies
and carbon copies
 Data control
 Data control group – verify and log
 Report distribution
 Supervision
IT Auditing & Assurance, 2e, Hall & Singleton
OUTPUT CONTROLS
 End user controls
 End user detection
 Report retention:
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Statutory requirements (gov’t)
Number of copies in existence
Existence of softcopies (backups)
Destroyed in a manner consistent
with the sensitivity of its contents
IT Auditing & Assurance, 2e, Hall & Singleton
OUTPUT CONTROLS
 Controlling real-time systems output
 Eliminates intermediaries
 Threats:
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Interception
Disruption
Destruction
Corruption
 Exposures:
 Equipment failure
 Subversive acts
 Systems performance controls (Ch. 2)
 Chain of custody controls (Ch. 5)
IT Auditing & Assurance, 2e, Hall & Singleton
TESTING COMPUTER
APPLICATION CONTROLS
1) Black box (around)
2) White box (through)
IT Auditing & Assurance, 2e, Hall & Singleton
TESTING COMPUTER APPLICATION
CONTROLS-BLACK BOX
 Ignore internal logic of application
 Use functional characteristics
 Flowcharts
 Interview key personnel
 Advantages:
 Do not have to remove application from
operations to test it
 Appropriately applied:
 Simple applications
 Relative low level of risk
IT Auditing & Assurance, 2e, Hall & Singleton
TESTING COMPUTER APPLICATION
CONTROLS-WHITE BOX
 Relies on in-depth understanding of
the internal logic of the application
 Uses small volume of carefully
crafted, custom test transactions to
verify specific aspects of logic and
controls
 Allows auditors to conduct precise
test with known outcomes, which
can be compared objectively to
actual results
IT Auditing & Assurance, 2e, Hall & Singleton
WHITE BOX TEST METHODS
1) Authenticity tests:
 Individuals / users
 Programmed procedure
 Messages to access system (e.g.,
logons)
 All-American University, student lab: logon,
reboot, logon *
2) Accuracy tests:
 System only processes data values that
conform to specified tolerances
3) Completeness tests:
 Identify missing data (field, records,
files)
IT Auditing & Assurance, 2e, Hall & Singleton
WHITE BOX TEST METHODS
4) Redundancy tests:
 Process each record exactly once
5) Audit trail tests:
 Ensure application and/or system
creates an adequate audit trail
 Transactions listing
 Error files or reports for all exceptions
6) Rounding error tests:
 “Salami slicing”
 Monitor activities – excessive ones are
serious exceptions; e.g, rounding and
thousands of entries into a single
account for $1 or 1¢
IT Auditing & Assurance, 2e, Hall & Singleton
COMPUTER AIDED AUDIT TOOLS
AND TECHNIQUES (CAATTs)
1) Test data method
2) Base case system evaluation
3) Tracing
4) Integrated Test Facility [ITF]
5) Parallel simulation
6) GAS
IT Auditing & Assurance, 2e, Hall & Singleton
#1 –TEST DATA
 Used to establish the application processing
integrity
 Uses a “test deck”
 Valid data
 Purposefully selected invalid data
 Every possible:
 Input error
 Logical processes
 Irregularity
 Procedures:
1) Predetermined results and expectations
2) Run test deck
3) Compare
IT Auditing & Assurance, 2e, Hall & Singleton
#2 – BASE CASE SYSTEM
EVALUATION (BCSE)
 Variant of Test Data method
 Comprehensive test data
 Repetitive testing throughout SDLC
 When application is modified,
subsequent test (new) results can be
compared with previous results (base)
IT Auditing & Assurance, 2e, Hall & Singleton
#3 – TRACING
 Test data technique that takes step-by-step
walk through application
1) The trace option must be enabled for the application
2) Specific data or types of transactions are created as
test data
3) Test data is “traced” through all processing steps of
the application, and a listing is produced of all lines of
code as executed (variables, results, etc.)
 Excellent means of debugging a faculty
program
IT Auditing & Assurance, 2e, Hall & Singleton
TEST DATA: ADVANTAGES AND
DISADVANTAGES
 Advantages of test data
1) They employ white box approach, thus providing explicit
evidence
2) Can be employed with minimal disruption to operations
3) They require minimal computer expertise on the part of
the auditors
 Disadvantages of test data
1) Auditors must rely on IS personnel to obtain a copy of
the application for testing
2) Audit evidence is not entirely independent
3) Provides static picture of application integrity
4) Relatively high cost to implement, auditing inefficiency
IT Auditing & Assurance, 2e, Hall & Singleton
#4 – INTEGRATED TEST
FACILITY
 ITF is an automated technique that allows
auditors to test logic and controls during
normal operations
 Set up a dummy entity within the application
system
1) Set up a dummy entity within the application
system
2) System able to discriminate between ITF audit
module transactions and routine transactions
3) Auditor analyzes ITF results against expected
results
IT Auditing & Assurance, 2e, Hall & Singleton
#5 – PARALLEL SIMULATION
 Auditor writes or obtains a copy of the
program that simulates key features or
processes to be reviewed / tested
1) Auditor gains a thorough understanding of the
2)
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application under review
Auditor identifies those processes and controls
critical to the application
Auditor creates the simulation using program or
Generalized Audit Software (GAS)
Auditor runs the simulated program using
selected data and files
Auditor evaluates results and reconciles
differences IT Auditing & Assurance, 2e, Hall & Singleton
Chapter 7:
Computer-Assisted Audit
Techniques [CAATs]
IT Auditing
& Assurance,
2e, Hall
&
IT Auditing
& Assurance,
2e, Hall
& Singleton
Singleton