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Intodaysmodernandcomputerizedworldevensmallcompanieshavehugenumbersof financialtransactionsgoingthroughthebooks.Asan(external)auditor,itsyour responsibilitytoanalysethesetransactionsandultimatelytoformanopinionastowhether theaccountsshowatrueandfairviewofthecompanysposition. Butwiththishugenumberoftransactions,itsimpossibletoanalyseeverythingmanually, sowhatisthealternative?Theansweriswhatisknownasgeneralizedauditsoftware. Generalizedauditsoftwarepackagesaretoolsdesignedspecificallyforauditorsandhave twomainfunctions: 1) Tofacilitateandautomatethetestingof100%ofapopulation 2) Tofocustheauditorsattentiononspecificareasortransactionswhichareofhigher risk Manyauditfirms(andinternalauditdepartments)havealreadyimplementedaudit software,howeveritisalarmingthattherearestillmanythathavenot.Themostcommon reasonfornotusingsuchsoftwareisnotwhatyoumightexpect,costitseaseofuseand learningrequirements.Butthisisamythauditsoftwarehasbecomefarsimplertouse, andtherearenowevenacoupleofproductsthatrunwithinExcel. ItsbeenafewyearssinceIlastcomparedtheGASandfrauddetectionpackagesavailable, andasthereareacoupleofnewplayersinthemarketIthoughtitwastimeforanupdate. HerewellcomparethefourmainGASproducts.IvealsoincludedExcelinthecomparison, asitsoftenusedasasubstituteforGAS,andcanperformmanyofthemoresimpletasks. Welllookat Dataanalysisfunctions Easeofuse Otherconsiderations Waystoselectaproduct Phone 6046694225 6135694675 Seewebsiteforlocaloffice listing 8886412800 +44(0)8458681424 Web
www.acl.com www.informationactive.com www.microsoft.com www.audimation.com
www.topcaats.com
Coredataanalysisfunctions Thematrixbelowsummarizesthemostcommondataanalysisfunctionsbysoftware vendor.Acheckmarkisplacednexttoeachfunctionifitsastandardfeatureofthetoolor couldeasilybecompletedusingthesoftwaresnativefunctions.Forexample,itmaybe possibletojoinorcompareanemployeeaddressfiletoavendoraddressfileusingthe VLOOKUP()functioninExcel,butthiscanbeacomplexfunctiontouseandisntflexiblein approach.Therefore,fortheJoin/Relatefunctionbelow,Excelwasntdeemedtohavethis functionality.Ontheotherhand,IDEAsoftwarehasaCrossTabulatecommandthats specificallylistedaspartofitsstandardmenusandsoInoteinthematrixthatithasthis function. Feature Description ACL ActiveD Excel IDEA TopCAATs atafor Excel
Aging Append/Merge Producesagedsummariesofdata basedonestablishedcutoffdates Combinestwofileswithidenticalfields intoasinglefile.Anexamplewouldbe tomergetwoyearsworthofaccounts payablehistoryintoonefile. Createsacalculatedfield(whichcan useaField/functionsuchasABSfor theabsolutevalueofFunctionsthe field)usingdatawithinthefile.For example,thenetpayrollpaytoan employeecouldberecalculatedusing thegrosspayfieldanddeductingany withholding/taxes Allowsyoutoanalyzecharacterfields bysettingtheminrowsandcolumns. Bycrosstabulatingcharacterfields, youcanproducevarioussummaries, exploreareasofinterest,and accumulatenumericfields. Audittechnologydesignedtofind abnormalduplicationsofspecific digits,digitcombinations,specific numbers,androundnumbersin corporatedata.Sincetheobjectiveis tofindabnormalduplications,auditors needabenchmarkthatindicatesa normallevelofduplication.Benfords Lawgivesauditorstheexpected frequenciesofthedigitsintabulated data.Thepremiseisthatwewould expectauthenticandunmanipulated datatoexhibitthesepatterns.Ifadata setdoesntfollowthesepatterns,this maybeacauseforauditorconcern andreview Identifiesduplicateitemswithina
CalculatedField/ Functions
CrossTabulate
DigitalAnalysis/ BenfordsLaw
Duplicates
Export
Extract/Filter
Gaps
Index/Sort
Join/Relate
Regression
Sample Statistics
Stratify
Summarize
specifiedfieldinafile.Forexample, thisreportcouldbeusedtoidentify duplicatebillingsofinvoiceswithinthe salesfile Createsafileinanothersoftware format(forexample,Excel,Word)for testing.Anexamplewouldbeto exportcustomeraddressinformation toWordforMailMergeingto customerconfirmationletters Extractsspecifieditemsfromonefile andcopiesthemtoanotherfile, normallyusinganiforwhere statement.Examplesinclude extractingallbalancesovera predefinedlimit Identifiesgapswithinaspecifiedfield inafile.Forexample,identifyanygaps inchecksequence Sortsafileinascendingordescending order.Anexamplewouldbesortinga filebysocialsecuritynumbertoseeif anyblankor999999999numbers exist. Combinesspecifiedfieldsfromtwo differentfilesintoasinglefileusing keyfields.Thisfunctionisusedto createrelationaldatabasesonkey fields.Itcanalsobedoneinan unmatchedfashiontoidentify differencesbetweendatafiles. Regressionanalysisusingstatistical meanstocalculateadependent variablebalance(suchasnetsales) basedonvariousindependent variables(forexample,product purchases,inventorylevels,numberof customers,etc.). Createsrandomormonetaryunit samplesfromaspecifiedpopulation Calculatesvariousstatisticsona selectednumericfield.Thesemaybe totalpositiveitems,negativeitems, averagebalance,etc. Countsthenumberanddollarvalueof recordsofapopulationfallingwithin specifiedintervals.Stratificationsalso provideausefulviewintothelargest, smallest,andaveragedollar transactions. Accumulatesnumericalvaluesbased onaspecifiedkeyfield.Anexample wouldbesummarizingtraveland entertainmentexpenseamountsby employeetoidentifyunusuallyhigh
paymentamounts. Thesearegroupsoftestsalldesigned toberunsimultaneouslyonaspecific reportorareaoftheaccounts,e.g. journalslistings,tradereceivables, fixedassets,etc Highlight Highlightsthedifferencesbetween differences twodifferentversionsofareport Outlierextraction Searchesforrecordswhichlieatthe extremesofapopulation(e.g.all invoicesthatexceed3timesthe averageforthatsupplier) *Excel2007only #Availableatadditionalcost Testgrouping
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Asyoucanseefromthematrix,alltheproductshavesimilartoolsandfeatures.Thefour specialisedproductsalloffermorefeaturesthanExcelastheyarewrittenforthisspecific purpose.AlthoughExcelisanincrediblypowerfultool,andwillcontinuetobeusedby auditorsforyearstocomeitdoesfallshortwhenitcomestomorecomplexorspecificdata analysis.However,whencombinedwithActiveDataorTopCAATs(whicharebothaddins forExcel),Excelistransformedintoaverypowerfuldataanalysisplatform. AndwhilepriceshouldntbetheonlyfactortoconsiderwhenchoosingGAS,thecostof ActiveDataorTopCAATsislessthanthepriceofIDEAorACL(basedonsingleuserlicense andalreadyhavingExcelinstalled). ACLandIDEAarebothunrestrictedtotheamountofdatathattheycananalyse(limited onlybythesizeofyourharddisk).ActiveDataandTopCAATsareallsubjecttothesame restrictionsasExcel,whichinversionsuptoExcel2003is65,536rows.However,Excel2007 allowsanalysisofover1,000,000recordsandbothActiveDataandTopCAATsarefully compatiblewiththis. ACLandIDEAarealsofasteratanalysingdatathanExcel,ActiveDataorTopCAATs,although noneoftheproductswereparticularlyslow. Easeofuse Otherthantheactualfeaturesavailable,themostimportantfactorwhenchoosingGASis theeaseofuse.Thisisoftencitedasbeingthebiggestbarriertoentryforauditfirms(and IAdepartments).Evenworsethanthis,Ioftenspeaktocompanieswhohavespenttensor hundredsofthousandsofdollarsonsoftwarefortheirstaff,onlytofindthatitssocomplex thatmostoftheirstaffdontactuallyuseit! WhilstACLandIDEAhavebothgoteasiertouseoverthelastfewyears,theresstillquitea steeplearningcurvewiththemboth.Bothmanufacturersrecommendmultidaytraining courses,andlessITliteratestaffoftenstruggletotakeitallin.OntheotherhandActiveData andTopCAATsarefarsimplertouse.BothruncompletelywithinExcelanenvironment thatjustabouteveryauditorisalreadyfamiliarwith.
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TopCAATshastakeneaseofusetotheabsoluteextreme,andreallyisaboutaseasytouse aspossible!Theuniquecolorcodedinputboxes(inputsarerediftheymissingorcontain invaliddata,andgreeniftheycontainvaliddata),simpleintuitiveuserformsandinbuilt help,resultinminimal(ifany)trainingrequirements. ActiveDataandTopCAATsalsoincludeanumberofmoregeneraltoolswhichenhance Excelsnativefunctionalityandmakelifealittleeasier(forexampletheTopCAATstoolbaror ActiveDatasworkbookfunctions).TopCAATsalsohasanEngagementDetailsfunction thatallowsyoutostoreinformationabouttheclientyourecurrentlyworkingon,soyou donthavetokeepenteringthesameinformationoverandoveragain. Training Alltheproductslistedhavetrainingnotonlyintheirfunctionalitybutalsoinhowtheycan beusedinafrauddetectionscenario.Thesoftwarevendorsorindependentfirmsusingthe softwarehaveproducedavarietyofselfstudy,groupstudy(sometimesincludingonline tutorials),andprivateinstructioncourses.Formoreinformation,pleaseseetheACFEs bookstoreatCFEnet.comorthesoftwarevendorWebsitesfornumeroustrainingoptions. Allvendorshavemailinglistcommunitiesand/orforumstohelpconnectusersoftheir productstodiscusspracticalapplicationscenarios. Youshouldalsoconsidertheamountoftrainingrequiredtoequipyourstaffwiththe necessaryskillstousethesoftwareeffectively.Theresnopointinspendingmoneyon softwareifyouarentpreparedtoinvestintrainingthestaffhowtouseit.Thetraining requirementsofActiveDataandTopCAATsarerelativelyminimalastheyleveragethe familiarExcelenvironment,andareslightlymoregearedupforeverydayusebythemasses. ACLandIDEAaremorespecialistproductsandtendtohavehighertrainingneeds. Dataimportconsiderations Ofcourse,anotherofthedifficultiesinusingGASisgettingthedataintothesoftware,and gettingitinasuitableformat.Allproductsprovideawizardthatwillassistinanalyzingthe followingfiletypes:Excel,Access,Dbase,Delimited,andFixedWidth.Thewizardwilldo mostoftheworkinensuringdataofthesetypesisimportedcorrectlyand,forthemost part,thisfunctionisallthatsneededformostexaminationsprovidedthatmostclient systemswillbeabletoexportdatainanASCIIformatandinoneofthesecommonfile types.Someoldercomputersystemsmayonlybeabletoprovidedatainamainframe format(suchasIBMsEBCIDICformat)andforthesespecialinstances,ACLandIDEAare theonlytoolsinoursoftwarelineupyoucanusetonativelyreadthesefiles AlltheproductsalsoallowOpenDatabaseConnectivity(ODBC)whichisthestandard databaseaccessmethoddevelopedbyMicrosoftandadoptedbymostaccountingpackages totransferdatabetweensystems
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ACLandIDEAalsosupporttheimportingofprintfiles,allowingyoutoeasilydefinethe fieldsandstripouttheheaders.WhilstthiscansometimesbeachievedinExcel,itisoftena fairlymanualtaskandcanleadtopoordataintegrity.Thereareadditionalproductsthatcan beusedtoimportprintfilestoExcel,suchasImportWizard (http://www.beside.com/download.html) However,inrealitymostmodernaccountingpackagesanddatabasescanexporttoeither .xlsor.csvsotheseadditionalimportfunctionsarerarelyused.Furthermore,itsoften easiertogetreportsinExcelformat,asthisiswhattheaccountingdepartmentattheclient usetoruntheirbusiness! HowtoselectapackageTestdrive WhenIminthemarketforacar,Imayliketheappearanceandlookofaparticularvehicle. AndthenIlllooktoseehowmanycarsofthatmodelIseeontheroad.ButIfinallybasemy decisiononhowthecarfeels.AlmostanycarwillgetmefrompointAtoBandwillprovide similarfunctions.Shoppingforfraudinterrogationsoftwareissimilar.Someofthebellsand whistlesmayberequirementsforaminorityofusers,butthecorefunctionalityand usabilityseemstobewhatmostpeoplewantonadailybasis.Mybestsuggestionistotake atestdrive:obtaindemoversionsofthesoftwarepackages(trialsofbothActiveDataand TopCAATscanbedownloadedfromtheirrespectivewebsites),andrunthesamereport througheachproduct.Youcandeterminewhichproductfeelsbest.Talktothecompany representatives,thehelpdesk,andotheruserstohelpformyouropinion. Summary WhenchoosingGeneralizedAuditSoftware,therearemanyissuestoconsider:dataanalysis features,easeofuse,cost,importrequirements,etc.Beforerushingoutandpurchasing expensivesoftwareforthewholedepartment,startsmallandbeginusingsomeofthese techniquesonafewofyourengagementstoassessyourneeds. AlltoooftenIseecompaniesinvesttensofthousandsofdollarspurchasingand implementingfraudinterrogationsoftwareonlytoshelveitforacoupleofmonthsandhita brickwallwhentheywenttouseitagainbecausetheyhadforgottenmostofwhattheyhad learned. AsActiveDataandTopCAATsintegratesowellwithExcel,theytendtobeusedonamuch moreregularbasis,andthisdecayofknowledgeovertimeismuchlessprofound. IhopeIvehelpedtodispelthemythsthatauditsoftwareisdifficultandexpensive,and movedyouclosertousingproactivedataanalysistechniquesonsomeofyour engagements.