Today’s increased use of computers and the corresponding trend to eliminate excess paperwork by storing files electronically has brought both benefits and challenges to the audit process.  Rather than relying exclusively on a dwindling paper trail, many CPA firms and internal auditors are incorporating electronic auditing techniques into their standard audit procedures.

One option for auditing electronic files is to use standard database programs such as MS Access.  By importing information into the software, or by linking to electronic transaction files, an auditor can efficiently analyze vast amounts of data.  Many common test procedures, such as aging, counting and totaling of transactions can be automated with these programs.   In addition, the software allows us to perform analytical procedures quickly and easily, such as sorting, stratifying or making comparisons within the data set.

Technology not only provides ways to improve audit efficiency, it can also greatly expand the auditor’s capabilities.  With these tools we are now able to effectively analyze 100 % of the population.  Many procedures that had not been practical to perform manually are now easily accomplished with the help of database software.   Maybe you are interested in extracting items from the population based on certain criteria within the database. Or perhaps you would like to search the data set for abnormalities.  Both of these tasks are easily accomplished with simple queries against the data.

Another option to consider is to invest in an electronic auditing package such as ACL, WizRule or IDEA.  These products offer some additional features and opportunities for improved efficiency. For instance, the programs include many built-in functions that make the software easier to use for those who are not familiar with database programs and expressions. The use of standard analytical procedures can also increase audit effectiveness. Functionality ranges from common audit procedures such as the ability to sequence records and search for gaps or duplicates, to more advanced features such as the ability to perform statistical analysis or to set up templates for commonly performed tasks. 

Electronic auditing and data analysis software often offers additional functionality such as the ability to perform sample selections or to assist in the detection of fraud.  Audit samples can quickly be drawn using a variety of sampling techniques, such as random selection, fixed interval or conditional sampling.  The ability to assist in fraud detection may be accomplished in various ways. For instance, it can search the data set for unusual biases, such as excessive expense reimbursement requests that are just below the thresholds that require a manager’s approval.   Or the data may be searched for patterns of fraud based on Benford’s Law which is the mathematical theory relating to the normal distribution of digits in a series of numbers.  The software will detect and identify unusual numerical patterns so they can be investigated.

It all sounds pretty great doesn’t it!  Electronic auditing offers many advantages but there are also some issues to be addressed before the techniques can be implemented.  The first step is to decide what tests should be performed. Whether you are searching for fraud or performing audit tests based on risk assessment, you will need to determine what information should be tested and what data elements you will need to complete the tests.  Some test ideas might be to compare vendor addresses with employee addresses, or to search for unusually high OT or bonuses in the payroll data.  The test options are only limited by the information available to you and your understanding of the data. 

Next you will need to consider how to get the information and how to get it into the software.  This is where electronic auditing software offers some additional benefits such as the ability to read many different file types allowing the software to use information from many different kinds of systems.  Some of these programs also provide “wizard” utilities to assist you through the import process.

Your last question must be “Where can I go for more information?”   You can find out more about the electronic auditing software mentioned above by visiting the following websites:

•  ACL Software: www.acl.com
•  WizRule and WizWhy: www.wizsoft.com
•  IDEA 2001 and DATAS: www.audittools.com

These sites provide specific information about their particular products as well as offering tips for how data analysis technologies can be used to help you meet the challenges of auditing in today’s electronic age.