whitepaper how to avoid making costly mistakes...

WHITEPAPER

How to avoid making costlymistakes when evaluating CAATs

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Welcome to this free whitepaper “How to avoid making costly mistakes when evaluating CAATs”. We hope that you find it useful and it sets you on your way to success with Computer Aided Audit Tools (“CAATs”).

This whitepaper will walk you through the process of evaluating CAATs to make sure that when you reach the end of the evaluation, you make the right decisions to ensure that your investment in CAATs is a wise one and you get the benefits you expect when you implement implementing them.

We’ll work through each of the process steps in the diagram below. The relavent step is highlighted at the bottom of each page.

Introduction 1

Part 1: Are CAATs for you? 2

Why are CAATs important? 2

What are CAATs? 2

Who uses CAATs? 2

What are the benefits of CAATs? 3

Part 2: Your CAATs options 5

Part 3: Shortlist and preparation 8

Evaluating CAATs software 8

The purpose of the trial 8

Who to get involved 9

Selecting the trial projects 10

Planning the testing 10

Trial timing and next steps 11

Introducing TopCAATs 12

Part 4: Trial and evaluate 13

The TopCAATs trial 13

Starting your trial 13

CAATs evaluation checklist 14

CONTENTS

Intro Options Shortlist Prepare Trial Evaluate

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PART 1

Are CAATs right for you?Why are CAATs important? Computing technology has revolutionised the way that every business operates, but in doing so has produced vast amounts of data. Even small companies have thousands of transactions going through modern accounting and ERP systems.

And, in many ways, computers have changed how auditors and accountants operate too – we all use email, word processors and spreadsheets all of the time.

But, when it comes to obtaining audit evidence, most auditors are still using approaches that date back to the pre-computer era.

Quite simply, Computer Aided Audit Tools (“CAATs”) bring auditing into the 21st Century and provide auditors with the tools and techniques they need for today’s computerised world.

If you aren’t using CAATs then you and your team may be:

• Using inefficient methods to obtain your audit evidence

• Spending hours each week carrying out monotonous or unfulfilling tasks

• Exposing your organisation to unnecessary additional risks

• Not delivering best value to your organisation and Audit Committee

• Missing out on opportunities to save money or recover cash

However, the use of CAATs has only begun to take off in a big way over the last few years, so you’re not too far behind the curve.

But, if you’ve not yet thought about whether CAATs are right for your team, then now is the time to start investigating. This whitepaper will outline the process to make this much easier for you and prevent you making costly mistakes.

What are CAATs?CAATs are software programs designed to help auditors carry out their work, with particular focus on data analytics, audit testing and interrogating records – both financial and operational.

They allow auditors to carry out tasks like sample extraction, exception reporting,

summarisation, gap and duplicate detection as well as many, many other types of testing.

In most cases they will significantly speed up or improve on the manual

audit testing that you’re currently carrying out. CAATs also enable

you to perform tests that are simply are not possible without this specialist software.

Who uses CAATs?CAATs are used by a wide variety of professionals, including internal auditors, external auditors, CPAs, fraud examiners, accountants, finance managers, IT auditors, and many other groups. The largest CAATs user group is internal auditors.

For more details on how CAATs are used in your profession, take a look at:

www.topcaats.com/whouses.


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What are the benefits of CAATs?The potential benefits from using CAATs and data analytics are significant and far reaching, but those that are most important for you and your organisation will vary depending on your circumstances.

Here is a brief summary of the most common benefits that companies see after deploying CAATs software:

Improved efficiency and reduced costsCAATs substantially reduce the time

spent carrying out manual audit testing, freeing up resources to be deployed onto more projects and as a result reducing costs. The time saved on performing testing also allows auditors more time to focus on more risky and subjective areas.

Reduced riskCAATs reduce risk in two ways. Firstly, they often allow testing of entire populations, sometimes eliminating the need for sampling and hence associated sampling risk. Secondly, they allow new tests to be used, which were not previously poss ib le , prov id ing greater insight into your financial and operational transactions.

Improved qualityCAATs significantly reduce the opportunity for human error and encourage a more consistent approach across different projects to improve quality.

It used to take hours to complete a monetary unit sample, and with TopCAATs it takes just minutes to perform, evaluate and document a sample

Vladimir Kolmakov, Partner, Sofia Financial Accounting Company

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As an engagement partner, where it used to take a week to review an audit file, it now takes only 1-2 days!

Adeniji Agboola, Managing Partner, Adeniji Agboola & Co, Nigeria

“By allowing us to apply our risk levels to the whole population, TopCAATs helps us to manage our audit risk and extract ap-propriate samples

Sue van der Valk, Partner, MGI Bass Gordon, South Africa

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“Clients are often impressed with our use of electronic au-diting software, and TopCAATs has positioned us as a ‘different kind of auditor”

Marcelo Toapanta, Director, Attesting Group Advisors, Ecuador

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Added valueBy gaining a much deeper understanding of the underlying records, controls deficiencies and other issues are uncovered that would have been missed without using CAATs. This allows you to provide more detailed findings in your report to the Audit Committee and more value to stakeholders across the business, through increased savings, reduced risk or cash recovery.

Increased opportunitiesWith a new set of tools at your disposal, you are able to provide new services to your organisation, such as detailed fraud reviews or cash recovery audits, to help combat fraud, close controls gaps, reduce errors and recover cash even further.

Increased job satisfactionCAATs reduce the time that your

auditors spend on mundane and repetitive tasks, such as chasing evidence, sample checking and ‘ticking and

bashing’, enabling them to focus on more interesting and rewarding areas.

Less time away from homeTesting with CAATs can often be carried out from an auditor’s base office rather than at remote sites, be they factories, stores or offices, resulting in less travel and expenses for your team and less disruption for auditees.

We have reduced the time the audit team are on-site at the clients offices by 15%!

Adeniji Agboola, Managing Partner, Adeniji Agboola & Co,

“If you don’t think that your team and your organisation would find these benefits valuable, then you may wish to reconsider spending your time evaluating CAATs software altogether.

However, if you think these benefits would be valuable, then read on to learn about your CAATs options and how you should go about evaluating software packages to validate the benefits that you would be able to achieve from using CAATs.


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PART 2

Your CAATs optionsSo, you’ve decided that CAATs could bring valuable benefits to your Audit team - it’s now time to start thinking about the different options available to you. There are three main categories of CAATs software, and it’s important for you to determine which would be the most appropriate for your needs – there’s no value in evaluating software that is never going to be right for you.

1. ExcelExcel is an incredibly powerful tool, and virtually every auditor will already have it on their PC. In fact, many auditors will already use it for basic data analytics.

With a moderate level of experience, a wide variety of tasks can be performed using Excel, especially if you get under the bonnet and into VBA programming.

Excel is actually the most commonly used ‘CAATs’ software, however that doesn’t mean that it’s necessarily the best for your audit teams.

Advantages• You’ve already got it on your PC, so

there’s no additional investment needed

• You can get started right away

• Most auditors already know the basics of Excel, some have advanced skills

• There are some good resources for using Excel as a CAAT available

• Excel power users can perform some quite complex analysis if they know how to program in VBA

Disadvantages• It can be difficult for many users to build

long and complex formulas

• It is easy to make mistakes resulting in incorrect or inconsistent formulas

• Excel wasn’t designed with audit tests in mind, so it can take time to setup or perform each test

• It is difficult to perform procedures in a consistent way

• There are some things that Excel just can’t do on its own, or requires extensive VBA programming

• There will be no audit trail or logging of activity

• Limited number of rows/columns (Excel 2007+ 1,000,000 rows)


SummaryWhilst a great place to start, most auditors quickly outgrow Excel, and find it has too many limitations. Although users are quickly able to carry out basic analysis, it can become too technical, complicated or time consuming to carry out more advanced analysis. The lack of standardisation of tests and no audit trail may be an issue for some auditors.

Most suitable forAuditors looking to perform infrequent or basic analysis, Excel power users, those with no budget.

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2. Excel add-insCAATs add-ins for Excel build on the familiar Excel interface, adding lots of additional functionality, designed specifically for auditors. They allow users to perform testing that isn’t possible with normal Excel, and make complicated analysis very simple to perform. There is no need to write formulas, custom scripts or learn VBA code. They take advantage of the plus points of Excel whilst eliminating most of the negatives. Combining standardised audit-specific tests with standard Excel features, they provide a very powerful and versatile CAATs solution.

Advantages• Uses the existing Excel interface that

auditors are already familiar with

• Simple and easy to learn and use

• Designed specifically for Auditing

• Allows you to do things that were previously impossible with Excel

• No need to build long and complex formulas

• Prevents users making formula errors or using inconsistent formulas

• Added audit trail functionality

• Enhances users’ efficiency when using Excel for non-CAATs work

• Ability to combine CAATs functionality with Excel’s extensive standard features

• Simple to share files and outputs with non-CAATs users

• Inexpensive

Disadvantages• Restricted to Excel’s row/column limits

(Excel 2007+ 1,000,000 rows)

• Not possible to write custom scripts (although VBA can be used)

• Some data import limitations when dealing with poorly formatted text reports


SummaryRunning on top of the familiar Excel interface, these add-ins have a very shallow learning curve. They are designed to be flexible, intuitive and easy to use, and allow auditors to carry out complex analysis quickly and easily with minimal training. These are a great option for the vast majority of auditors.

Most suitable forAuditors of all IT skill levels, large deployments to all auditors, those that are specialists in auditing but not necessarily data analysis.

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3. Standalone solutionsStandalone CAATs solutions can be incredibly powerful and if your team have the right skills and training, it’s possible to write scripts to carry out almost any data analysis task. The downside is they are often very technical with a steep learning curve.

SummaryStandalone options are fantastic for specialists who are carrying out complex data analytics on a daily basis, are analysing massive reports, or have custom or complicated scripting needs.

They’re less appropriate for deployment to the whole audit team where the user base has a wide variety of IT skills, as training can be lengthy and costly and there is a higher risk of user rejection.

Advantages• Very powerful with wide range of

features

• Allows custom scripts to be written

• Wide range of data import functionality

• No restrictions on the number of data rows

Disadvantages• Too technical for most users

• Very steep learning curve, not particularly intuitive

• Training is forgotten if the software is not used regularly

• Complicated to set up testing

• Can take a long time to see return on investment

• Files must be exported to Excel to be shared with non-CAATs users

• Expensive

4. A two-tier solutionAnother option to consider is a two-tier solution, which can be particularly effective for larger audit teams. With this, a few data analytics specialists or IT auditors are fully trained in one of the stand-alone solutions, and an Excel add-in solution is deployed to every member of the team.

This brings with it all the benefits of the Excel Add-in solution enabling you to use CAATs on every single audit. It also mitigates the few disadvantages, as when an auditor comes across a huge report or needs some really advanced testing to be performed, it can be passed to the specialists, who have the skills and training to carry it out.


Most suitable forData analytics specialists, analysing really huge reports, performing complex testing using custom scripts.

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Evaluating CAATs softwareOnce you’ve decided which category of CAATs software is likely to best meet your needs, it’s time to create a shortlist of solutions. Thankfully there are only a handful of specialist audit data analysis products on the market, so that should be relatively straightforward.

Once you have a shortlist of solutions, it’s time to look towards carrying out your evaluation, and we would like to highlight the most important message in this whole whitepaper:

You must have a proper trial before you invest in any CAATs software product

Most software vendors can make their solution look amazing in a sales demonstration, webinar or online video, but the only way you can determine whether it meets the needs of your organisation and users’ needs and goals is to try it out yourself.

Even if you’re only looking at one solution, before you invest in software and training it’s critical to be confident that you will see a real return on that

investment.

The purpose of the trialWhen it comes to the end of the trial, you will need to make a decision – whether CAATs software is right for your company and whether to purchase one of the trialled software products or not. To make that decision, there are four key questions that you should be looking to answer:

1. Is the software going to deliver the benefits we expect?

2. Is the software compatible with our other systems and processes?

3. How easy is the software to use, what are the training requirements, and will our staff use it?

4. Is there a solid business case for the software?

If you structure your trial properly then it should become very easy to answer these 4 key questions, which in turn should make the decision on whether to purchase a product very easy.

At the end of your trial you should be able to confidently assess whether CAATs are right for your team, which software you will purchase (if any), how you will deploy it to your staff and what training you will need to provide to get them up to speed.

The remainder of this whitepaper will help you prepare for your trial, and ensure that by the time it comes to an end, you’re able to answer those 4 key questions.


PART 3

Shortlist and preparation

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Who to get involved

Project SponsorAt the end of the trial, a decision will need to be made whether or not to implement the software, or somebody will need to present a business case to a higher authority (e.g. the Board).

It’s important to get decision makers involved in the trial process from the very beginning. The Project Sponsor is typically a Senior Manager, Director or VP.

Project LeaderIt’s important to have a central coordinator to ensure the trial runs to plan (i.e. you’re on track to provide the information that’s needed to answer the 4 key questions) and to collate this information.

The Project Leader is normally a Manager, but may be the same person as the Sponsor.

TrialistsThis group should be made up of end users of the software, the people who will actually be using it if and when it is implemented.

It is vital to obtain feedback from a range of individuals, and we recommend having between 2 and 10 people trialling the software, depending on the size of your team or the number of seperate teams involved. For an wide deployment, your trialists should represent a cross-section of user groups.

Your trialists should also represent a range of skill levels. If your trialist group only includes people with previous CAATs experience, or who are very good with IT, your findings won’t be representative of your team as a whole.

By including a cross section of skill levels, you will be in a far better position to answer the key question regarding ease of use, user acceptance and training requirements.

Of course, the trialists you select may also be influenced by who is working on the projects you wish to incorporate into the trial.

AuditeesTo carry out a proper evaluation, you need to be using real data, and to get real data you’ll need to get some auditees from the business on board. Before you begin your trial you should have identified some suitable projects, and discussed data requirements and access with the auditees.

ITThe final group is IT, and they may not always need to be involved. However, if they are, it should be solely to check compatibility with other systems and address IT related issues. The IT department should not play a significant role in evaluating the software and whether it meets the needs of the ends users – their involvement should be as facilitators, not decision makers.

IT may also be helpful in extracting the data you need to perform your testing.

You may need to discuss installing the TopCAATs trial on your computer with your IT department, and there are some resources for IT departments at

www.topcaats.com/itresources.

Needless to say, you should identify everyone who is going to be involved in your trial before you begin it!


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Selecting the trial projectsThe ideal scenario for your trial is to use live projects. This will give you the best feel for how the software will work in real world situations.

If this is not possible, you should still aim to work with real data, whether it’s going back over completed projects and looking for improvements using CAATs, or carrying out the trial in parallel with live work using your current procedures.

Identify projects where you have a good working relationship with the auditees, and you know will be willing able to work with you to obtain the data. Alternatively, you may already have suitable data from a previous project that can be used for the trial.

Try and find projects that use your organisation’s most common systems. Given the potential variety of systems in use across your organisation, you’re unlikely to be able to test every one, but try and include those you work with most often.

Select projects that are representative of the type of work that you commonly do. If 75% of your reviews are finance and accounting based, you’ll get much more useful feedback and information from the trial by selecting one of these rather than a one-off environmental audit, for example.

You should identify the projects you will use before you begin your trial!

Planning the testingAs previously mentioned, the most successful trials use real projects, real data and are conducted in a real audit environment.

For each of the trial projects, identify focus areas, such as inventory, expenses and journal testing, and identify specific testing to be carried out in each of those areas.

Go through your current test plan, and look for tests

that can be replaced using CAATs and data analytics. Identify testing that currently

takes a long time – are there CAATs procedures that

can be used instead?

Are there areas of your audit work that you currently have concerns about, are particularly risky, or where additional CAATs testing could potentially provide extra value?

Generally the Project Leader should work with the trialists to establish appropriate testing to carry out and trialists should have a good idea of the testing they will be doing before you begin your trial.

By planning your trial properly, involving the right people, selecting the right projects and carrying out the right testing, your trial should enable you to answer those 4 key questions, and ensure you make the right decision for your firm, avoiding costly mistakes.


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Trial timing and next stepsThe benefits of CAATs can be substantial, and the sooner you start your trial, the sooner you will be able to realise those benefits.

But, there’s no point in rushing into it. If you don’t prepare for your trial sufficiently, you may not be in a position to answer those 4 key questions at the end of it.

The first thing to do is establish who the Project Leader will be – who will take overall responsibility for the trial. If that person isn’t you, then you should probably give a copy of this whitepaper to the Project Leader.

If you haven’t already, the Project Leader needs to identify the Project Sponsor, and ensure that they’re on board – if you don’t have their support then there may not be any point in conducting the trial.

The Project Leader can then begin to identify suitable projects and the trialists who will take part.

Only once you are at this stage should you proceed to actually initiating a trial - most software trials are time limited, so you want to maximise the time your trialists have using the software, rather than setting things up.

Don’t forget to tear off and complete the CAATs evaluation checklist that’s included at the end of this whitepaper, to ensure you’re fully prepared for your trial.


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Introducing TopCAATsData analytics for every auditor

TopCAATs falls into the ‘Excel add-ins’ category of CAATs software that we introduced previously and combines the familiarity and flexibility of Excel with the power and bespoke audit-focused tests of a standalone CAATs package.

It has been designed specifically to maximise the usage of CAATs within your organisation. It is intended for use by every auditor in your team, enabling them to perform data analysis on every audit and on every test within each audit.

With TopCAATs, every auditor can perform the sorts of data analysis that previously needed an expert, with extensive experience of a standalone CAATs package to perform.

TopCAATs users include internal audit teams of one person, right up to the FTSE100, and external auditors from individuals to Big 4 accounting firms, in countries across the world.

Here are some of the things that make TopCAATs different from other CAATs packages.

• It has been designed from the ground up to be incredibly intuitive and easy to use

• It’s based in Microsoft Excel, so it’s totally familiar

• It’s very easy to learn - no complex scripting or function writing is needed

• It is perfect for use by every auditor in your team, not just specialists in data analytics

• It includes our revolutionary Section Modules as standard, allowing you to perform up to 26 tests on a single report in one go. TopCAATs has Section Modules for inventory, trade payables, trade receivables, journals, non-current assets and expenses

• It includes all of the analytical tools that you would wish to use, including join, summarise, append, stratify, sample, extract, duplicates, gaps and many, many more

• It also includes the TopCAATs toolbar, with various tools that just save you time and make your life easier whenever you’re working in Excel

• It retains access all of the Excel functionality you’re used to and you can share outputs with colleagues and management as everything is in standard Excel files

• We also give you free access to our users’ website which contains our extensive test library, free self-study training courses and other great resources to help you get the most out of TopCAATs

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The TopCAATs trialYou will probably have noticed by now that we think having a trial is rather important! Not only do we offer a free trial, we actually insist that you have one before you can purchase TopCAATs.

The TopCAATs trial is 4 weeks long, which provides plenty of time for your trialists to get to grips with TopCAATs and carry out some real world testing.

The TopCAATs trial software is also fully functional – there are no restrictions or limitations, so you are free to carry out testing in real world scenarios, you can test entire data sets and achieve real results. The trial software is no different to the full licensed version.

Throughout your trial we have specific guidance for the Project Leader, Project Sponsor and trialists to ensure everyone’s has the information they need as and when they need it – it picks up right where this whitepaper finishes and takes you right up to the evaluation and selection.

To help you plan for your trial, you can take an advance look at all of the guidance that we provide during the trial at

www.topcaats.com/trialresources.

We want your TopCAATs experience to be a delight, from here all the way through to deployment, training and on-going support, and we’re here to help you at every step.

Starting your trialWhen you’re ready to begin your TopCAATs trial, the Project Leader should sign up at the link below

www.topcaats.com/start-our-trial

You will be asked to provide details for the Project Sponsor, Project Lead and

trialists, so please make sure you have these handy.

Your trial period will begin on the Monday after you sign up, although the trialists will be able to install TopCAATs immediately, and there is a little pre-trial reading for them to do.

Only one person from your company needs to request a trial, but they should provide

the details for all trialists at the same time.

Please note that we only allow one 30- day trial per company, and we are unable to offer trial extensions. Therefore it is imperative that you have planned for your trial before you begin, so you are able to fully evaluate TopCAATs during the trial period. On the following page is a checklist that the Project Leader can tear out and use to ensure everything is in place before you begin.

After your trialOnce your trial period is over, if you’ve followed the guidance in this whitepaper and the trial resources introduced above you should have some detailed findings and a business case, which should make the final decision for the budget holder quite simple.


PART 4

Trial and evaluate

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CAATs Evaluation ChecklistUse this checklist to ensure you’ve got everything you need in place to carry out a successful CAATs evaluation.

1 I have identified that our organisation is likely to benefit from CAATs/data analytics

c

2 I have identified the Project Sponsor, and have their support to carry out the trial

Project Sponsor ______________________________________________

c

3 I have identified the projects that we are going to be using during the trial

Project 1 ______________________________________________

Project 2 ______________________________________________

Project 3 ______________________________________________

c

4 I have identified the trialists who are going to be taking part

Trialist 1 ______________________________________________

Trialist 2 ______________________________________________

Trialist 3 ______________________________________________

Trialist 4 ______________________________________________

Trialist 5 ______________________________________________

Trialist 6 ______________________________________________

Trialist 7 ______________________________________________

Trialist 8 ______________________________________________

Trialist 9 ______________________________________________

Trialist 10 ______________________________________________

c

5 I have identified some potential testing to be carried out and discussed this with the trialists

c

6 If appropriate, I have discussed installing TopCAATs with our IT department

c

7 Our trial will start on _______________________ , and we have allocated time for the Project Sponsor, Project Leader and Trialists to carry out the trial over the following month

c

Once you’ve ticked all the above, you’re ready to begin your TopCAATs trial, just visit the webpage below to get started

www.topcaats.com/start-our-trial

Contact usWe’d be very happy to discuss your needs in more detail

TopCAATs is a Reinvent Data product

Reinvent Data is a limited company registered in England and Wales. Registered number:6492350.

Registered office:49 Doctor’s Lane,Melton Mowbray, Leicestershire, LE13 1QB, United Kingdom.

Charlie WalkerCEO

email [email protected] 0845 868 1424

Stefan DavisDirector

email [email protected] 0845 868 1424

Reinvent Data Ltd

TopCAATs

@TopCAATs

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