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CA Final · Advanced Auditing, Assurance and Professional Ethics · Digital Auditing & Assurance

CA Meera is auditing Kaveri Textiles Ltd, which uses an ERP system. During the audit she plans to use a generalised audit software to re-perform the calculation of ageing of trade receivables from the entity's receivables master file. Which of the following is the most appropriate first step before relying on the output of this computer-assisted audit technique (CAAT)?

The auditor should first obtain assurance that the extracted data file is complete and accurate, typically by reconciling its totals to the general ledger control account. Without this, any CAAT result rests on unreliable input, and software use does not remove the need to understand controls.

  1. AObtain assurance that the data file extracted is complete and accurate and agrees to the general ledger control accountCorrect
  2. BRely on the management-prepared ageing report as the software itself guarantees accuracy
  3. CSkip testing of general IT controls since CAATs replace the need for any control evaluation
  4. DSend confirmation requests only for balances above the highest invoice value

Explanation

Before analysing data with software, the auditor must be satisfied that the data extracted is complete and reliable, for example by reconciling file totals to the ledger control account. Using management's report without checking its completeness leaves the test unreliable, and CAATs do not remove the need to understand IT controls over the data source.

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