Auditing of today’s modern business can be significantly improved both in terms of effectiveness and efficiency. And not just External Audit, in all areas of the business from Management to Internal Audit. But how?
The principles of auditing are simple. In a modern business, there is insufficient time and resource to consider every transaction or action in a business, instead an auditor will pick a sample and use this as the basis for their assessment. This however relies on the sample being representative of the whole. This may be fine for simple processes, but what if there are thousands or millions of transactions every day. How can you ever pick a sample that is representative? And how can one ever pick a large enough sample to ensure that there is sufficient coverage? Answer. Computer Assisted Audit Techniques, or CAATs.
Computers do away with the notion that samples are required, allowing the audit to take 100% of the population into consideration. This is done in situations where there is a high volume, low value transaction, such as in telecoms or utilities; where the myriad of products and countless customers make the calculations difficult or complex. By reapplying rules to the source data, it is possible to recalculate totals such as income, cost and profit. Calculations that were previously impossible to validate, will suddenly be open to scrutiny; allowing management, the wider business and auditors to consider all manner of implications. Perhaps the objective is to test whether updates to tariffs occurred at the right time, or that customers are being billed completely and accurately. Whatever the objective, it is now possible to independently validate any complex calculation in your business.
CAATs will help to lower the cost of your external audit, increase consumer and investor confidence, and help you to manage your business in ways you never thought possible: measure the impact of promotions, model the impact of pricing using real data, look at trends and make realistic predictions. Whatever it is you want to do, CAATs can help you achieve your goals. Get in touch with us if you’d like to know more about our Revenue Assurance capabilities.