What is meant by CAATs?

CAATs short for Computer Assisted Auditing Techniques simply means that assistance of computers is taken by the auditor while carrying out audit engagement. Some students misinterpret the term as if computers will carry out audit engagement as a virtual assistant to the auditor which is not the case as yet.


As we have witnessed since last few decades computers or Information Technology (IT) based systems has helped us making our lives easier in almost every aspect. Same is the case with the auditor’s work. Simply put CAATs refers to use of computers in carrying usual audit procedures. Auditor performs variety of procedures throughout the audit engagement from planning to finalization of audit and compiling audit file.

Taking technically in auditing terms the major use of CAATs is in processing the data collected by the auditor through different sources to obtain sufficient appropriate audit evidence by applying techniques like sorting, filtering, graphs, quantitative and statistical analysis including comparisons, data mining, identifying patterns, pointing out duplicates, casting, running sequence tests, designing samples and selecting (extracting) a representative sample by stratifying the population, finding legit employees in payroll system, checking what formulas have been applied to carry out deductions from salaries to calculate PAYE, printing and distributing electronically audit programs to audit team members, maintaining questionnaires and records of inquiries of client’s staff, electronic copies of important documents, recording internal control system using flow chart programs, compiling and indexing audit file etc are just one of the few examples how computer helps auditors in audit engagement.

Sometimes CAATs is also translated as Computer Assisted Auditing Tools or even a better derivation is CAATTs which is Computer Assisted Auditing Techniques and Tools. CAATTs basically refers to dedicated auditing software or systems used by auditor in carrying out audit work. We can say that these are specialized software for auditing purposes unlike usual spreadsheet programs or word processors.

Reason behind growing use of CAATs or CAATTs stems from the same benefits that we experience in other aspects of business like speed, accuracy, ease of use and cost effectiveness etc. Like other computer based systems CAATs also have similar benefits. Before CAATs, auditors used to handle large volumes of subject matter through sampling techniques that often caused problems. Now with CAATs in place even the whole population can be subjected to tests of controls or substantive procedures. For example, identification of sequence disconnections or any unexpected high rate of sales returns in certain period can be done easily.

One point I would like to emphasize again is that they are “aid to end” and not an end in itself and due to the same reasons they are used in combination with other audit procedures to corroborate and supplement or contradict the already possessed information with the auditor. For example, in attending stock counts auditors often use CAATs with observation of counting procedure and inquiry of staff conducting stock take.

Another important use of CAATs is in the form of analytical procedures that involves comparisons, ratios and statistical analysis. Analytical procedures help auditors to identify evidence that was overlooked in audit procedures at planning and confirmatory stages of audit. For example comparing total month end sales of this year with previous year’s same month and the ration of sales returns to identify cut-off problems or fake sales entries.