Chapter 3: Section 3

Question 1

What are automated tools and techniques?

Answer 1

Audit techniques carried out by the auditor using a computer

Question 2

Automated tools and techniques can include simple procedures and more complex computer programs and techniques such as?

Answer 2

Simple procedures such as auditor using spreadsheets to manipulate data, and more complex computer programs and techniques such as embedded audit facilities which allow the auditor continuous review of client’s systems

Question 3

When should automated tools and techniques only be used and why?

Answer 3

With client permission as they can be intrusive and the client will not want the auditor’s software to cause problems in their own computer systems

Question 4

What is the benefit of using automated tools and techniques?

Answer 4

Technique allows large volumes of data to be analysed at great speed, making the audit process more efficient and allowing the auditor to focus on other tasks if required

Question 5

What is the drawbacks of using automated tools and techniques?

Answer 5

However, like any system, they require quality data for input otherwise the output of this process will not be reliable.
Skills and experience (which may not always be available) are required to both administer and interpret the findings

Question 6

What is the flowchart to remember for automated tools and techniques?

Answer 6

Automated tools and techniques = audit soft ware and client’s own system

Client’s own system = Test data and embedded test facilities

Test data = Live and Dead

Embedded test facilities = SCARF and ITF

Question 7

What is audit software?

Answer 7

Software used by the auditor to perform testing on a client’s financial systems and data

Question 8

What testing is audit software primarily used for?

Answer 8

Substantive testing

Question 9

Audit software is primarily used for majority of audit engagements.
True or false?

Answer 9

True

Question 10

What will happen with audit software when it is needed?

Answer 10

Data will be downloaded from client’s system to the auditor’s compute when a number of typical tests could be performed

Question 11

The data downloaded from client’s system to the auditor’s computer when a number of typical tests could be performed such as what?

Answer 11

a) Reperformance of calculations e.g. ageing of TR, casts of day books, ledger listings or inventory reports (additional comfort is gained here as the auditor’s own software is being used to generate evidence)
b) Extraction of samples
c) Analytical review e.g., ratio calculations

Question 12

What is using client’s own system primarily used for and what is it more suited to?

Answer 12

Primarily used for tests of control and more suited to larger audit engagements

Question 13

What will testing of controls requiring clients own system require?

Answer 13

Significant co-operation from the client especially in terms of computer access times

Question 14

What do the 4 typical uses of client’s own system include?

Answer 14

1. Test data
2. Embedded test facilities
3. Systems Control and Review File (SCARF)
4. Integrated Test Facilities (ITF)

Question 15

What are Integrated Test Facilities (ITF)?

Answer 15

A ‘virtual’ copy of the system used for testing purposes

Question 16

What is systems control and review file (SCARF)?

Answer 16

A diagnostic report of how the system is working

Question 17

What are embedded test facilities?

Answer 17

These aim to extend the tests of control more fully throughout the period than test data and include use of a systems control and review file (SCARF) and integrated test facilities (ITF)

Question 18

What is test data?

Answer 18

Submission of ‘dummy’ data into client’s own system to ensure it is processed correctly, or not processed if the data is deliberately false.
This can be conducted ‘live’ or ‘dead’ i.e., as part of normal processing or at times when the computer is not in business use

Question 19

What are data analytic tools?

Answer 19

Use of technology to interrogate entire data sets

Question 20

What have recent advances in big data technology seen?

Answer 20

Automated tools and techniques evolve into something more sophisticated that could become a real game-changer for the auditing profession

Question 21

Why has the auditor’s scope now increased due to data analytics?

Answer 21

Ability to access and interrogate entire populations of client data using data analytics has mean auditor’s scope can now be increased.

Question 22

Since data analytics has increased auditor’s scope, what has this allowed auditor’s to do?

Answer 22

Concentrate on interpreting the messages locked inside the data instead of spending all their time simply trying to analyse it

Question 23

The 3 examples of types of audit activities that could benefit from data analytics include?

Answer 23

1. Analysing data sets for info on specific locations, products, employees or times for the purpose of identifying fraud or error
2. Reconciling activity such as matching orders, despatch notes and invoices for evidence of misstatement
3. Inspecting journals to identify patterns that may indicate fraud

Question 24

Alongside the benefits of data analytics, what underpins all this?

Answer 24

Superior processing power that AI and machine learning can introduce to any analysis undertaken by the auditor.

Question 25

What needs to happen to benefit from AI and machine learning?

Answer 25

Significant amounts of training and investment are required to unlock the potential of this technology, but the possibilities are almost without limit