Automated tools and techniques - Use of ATTs including softw...

Learning Outcomes

After reading this article, you will be able to explain what automated tools and techniques (ATTs) are and how they are used in an audit. You will be able to describe audit software, the use of test data, and data analytics, state the advantages and drawbacks of ATTs for auditors, and apply these concepts to both control and substantive audit procedures.

ACCA Foundations in Audit (FAU) Syllabus

For ACCA Foundations in Audit (FAU), you are required to understand how technology affects the audit process. In particular, revision should focus on:

• The role and use of automated tools and techniques in audit work
• Types of ATTs, including audit software, test data, and data analytics tools
• How ATTs can be used in both control and substantive procedures
• The advantages and disadvantages of using ATTs
• The impact of ATTs on audit evidence and audit documentation

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which type of automated tool allows an auditor to extract and test specific data sets directly from a client's system?
   1. Audit software
   2. Analytical procedures
   3. Test data
   4. Internal control questionnaires

2. True or false? Test data is used by auditors to test the operation of programmed controls in a client’s accounting system.

3. Name two benefits and one drawback of using automated tools and techniques (ATTs) in audit evidence gathering.

4. Briefly explain how data analytics can assist auditors during substantive testing.

Introduction

Most audit clients now use computerised accounting systems. Auditors must keep pace by using automated tools and techniques (ATTs) to conduct effective and efficient audits. ATTs help auditors test both the controls built into systems and the records produced by those systems, using toolsets such as audit software, test data, and data analytics.

Building the skills to use these tools is critical for FAU candidates. In modern audits, it is not sufficient to verify input and output alone—auditors must also examine the processes within the computer itself. ATTs make this possible.

Key Term: automated tools and techniques (ATTs)
Computer-based tools and procedures used by auditors to plan, perform, and document audit work, including audit software, test data, and data analytics.

TYPES OF AUTOMATED TOOLS AND TECHNIQUES

Automated tools and techniques can be grouped into three main categories commonly tested in the ACCA FAU exam:

1. Audit software
2. Test data
3. Data analytics

Each type is explained below.

Audit Software

Audit software consists of purpose-built programs, either commercially available or custom-built, that can examine, extract, and test data from the client’s systems. Auditors commonly use these to select samples, recalculate figures, or check for completeness.

Key Term: audit software
Computer programs used by auditors to interrogate and test a client’s electronic accounting records.

Audit software may be:

• Generalised (pre-built and adaptable to many clients)
• Customised (created for a specific audit engagement)
• Client-provided (programs built into the client’s system, used under auditor control)

Test Data

Test data involves preparing selected data transactions to be input into the client’s system, either separately or as part of normal processing, under the auditor's supervision. The purpose is to check whether programmed controls work as expected.

Key Term: test data
Artificial or actual data prepared by the auditor and processed by the client’s accounting system to test the operation of programmed controls.

The auditor compares the system’s actual output for the test data to the expected outcome. This helps verify that controls, such as authorisation checks or error detection routines, are functioning throughout the processing stage.

Data Analytics

Data analytics includes a range of tools and techniques that allow auditors to analyse, visualise, or model data for audit purposes. Using data analytics, auditors can scan all transactions, identify patterns, highlight outliers, and perform analysis that would be too resource-intensive using manual methods.

Key Term: data analytics
The process of reviewing large datasets using software tools to identify trends, anomalies, or specific transactions relevant to an audit.

This approach enables full-population testing, identification of unusual items, and improved risk assessment.

Key Term: computer-assisted audit techniques (CAATs)
Techniques that use computer-based tools to test and examine client accounting data, including audit software and test data.

USES OF ATTs IN THE AUDIT PROCESS

ATTs are used at various stages and for multiple audit purposes:

1. Testing Controls

• Test data allows the auditor to verify that programmed controls (e.g., input validation, authorisation, or error messages) work correctly under different circumstances.
• Audit software can be used to check that certain controls, such as transaction approval routines, are consistently applied across data records.

2. Performing Substantive Procedures

• Audit software enables the auditor to extract large or unusual transactions for further examination (e.g., all items above a set value).
• Data analytics can be used to identify anomalies such as duplicate payments, transactions processed outside normal hours, or sudden changes in supplier patterns.
• ATTs can recalculate or reperform key figures and reconcile ledgers efficiently.

3. Gathering Audit Evidence

• ATTs allow auditors to efficiently examine the complete data population, rather than just a sample.
• Data output from audit software is often used as direct audit evidence when planning or concluding audit work.

Worked Example 1.1

Scenario: The audit of Alpha Ltd involves reviewing a transactions file containing 250,000 entries. The team is tasked with identifying all payroll payments above £7,500 and checking for duplicates.

Question: How can audit software assist in this situation?

Answer:
Audit software can be configured to scan the payroll file and extract all entries above £7,500 for review. It can also identify potential duplicates by flagging transactions with the same employee ID, amount, and date. This approach enables the auditor to efficiently target risky items and potential errors.

Worked Example 1.2

Scenario: During an audit, you wish to check if the client’s sales system correctly rejects orders missing a customer code.

Question: How can test data be used for this control test?

Answer:
The auditor can prepare a dummy sales order missing the customer code and input it into the client's system. If the system is operating correctly, it should reject the order and generate an error report. This demonstrates that the programmed control is working.

Worked Example 1.3

Scenario: You want to examine whether there are any unusual trends in sales for a retail client over a year.

Question: How can data analytics help?

Answer:
Using data analytics software, the auditor can visualise sales data by month and region, quickly spotting anomalies such as an unexpected spike or dip. Any irregular pattern can then be targeted for further substantive testing and enquiry.

Exam Warning

A frequent error in the exam is to confuse test data with audit software. Test data is used to check how the client's system processes transactions and whether controls operate, while audit software interrogates larger volumes of data and extracts information for analysis. Be careful not to mix up their purposes in application questions.

ADVANTAGES AND DISADVANTAGES OF ATTs

Knowing both benefits and drawbacks is essential for written exam questions.

Advantages:

• Audit tasks can be performed more quickly and efficiently
• Allows testing of entire data populations, not just samples
• Facilitates detection of unusual transactions or patterns
• Reduces manual error and increases reliability of evidence
• Supports retention of audit documentation in electronic format

Disadvantages:

• High set-up and training costs for tools and staff
• Requires specialist technical knowledge
• May be unavailable for very small or manual clients
• Over-reliance may lead to neglecting manual controls or missing system changes
• Risks associated with corrupting client data if not carefully managed

Revision Tip

Focus exam answers on specific ATTs: for example, state ‘test data’ when describing control tests, and ‘audit software’ or ‘data analytics’ for data mining and substantive work. Avoid vague descriptions.

Summary

Automated tools and techniques are a central feature of the modern audit. Audit software, test data, and data analytics each play specific roles in evaluating controls, performing substantive work, and gathering sufficient, appropriate evidence. The use of ATTs encourages efficiency, reliability, and enhanced audit quality. However, limitations exist, and auditors must consider cost, skills, and audit risks when selecting and applying these tools.

Key Point Checklist

This article has covered the following key knowledge points:

• Define and distinguish audit software, test data, and data analytics as types of ATTs
• Explain how ATTs are applied to audit procedures for both controls and substantive testing
• State advantages and drawbacks of using ATTs in auditing
• Illustrate ATT use with practical worked examples
• Describe common misunderstandings and the correct application of key ATT types

Key Terms and Concepts

• automated tools and techniques (ATTs)
• audit software
• test data
• data analytics
• computer-assisted audit techniques (CAATs)