Question

Using the computer to discover international financial misstatements in transactions and account balances. AMI international is a large office products company. Headquarters management imposed pressure on operating division managers to meet profit forecasts. The division managers met these profit goals using several accounting manipulations involving the record-keeping system that maintained all transactions and account balances on computer files. Employees who operated the computer accounting system were aware of the modifications of policy the managers ordered to accomplish the financial statement manipulations. The management and employees carried out these activities: 1. Deferred inventory write-downs for obsolote and damaged goods. 2. Kept open the sales entry system after the quarterly and annual cutoff dates, recording sales of goods shipped after the cutoff dates. 3. Recorded as sales transactions that had been as leases of office equipment. 4. Recorded shipments to branch offices as sales. 5. Postponed recording vendors invoices for parts and services until later, but the actual invoice date was faithfully entered according to accounting policy. REQUIRED: Describe one or more procedures that could be performed with CAAT to detect signs of each of these transactions manipulations. Limit your answer to the actual work accomplished by the computer software.

Answer 1

CAAT stands for Computer Assisted Audit Techniques.

Computer Assisted Audit Techniques (CAATs) is the tool which is used by the auditors. It faticilates them to make search from the irregularities from the given data. With the help of this tool, the internal accounting department of any firm will be able to provide more analytical results.With the help of Computer Assisted Audit Techniques, more forensic accounting with more analysis can be done.

The following procedures performed with CAAT could have detected the sign of each of these manipulations:-

1) Year end cutoffs is a technique which can be performed with CAAT. In this technique, the books automatically closes on the last day of the year. And the tool can generate a file which shows the log of sales recorded after the cut off dates.

2) A technique can be used wherein only specific transactions can be recorded in the system. For example in sales books, entry for only sales can be recorded and that too only to predefined customers. A list of customers can be mapped to the sales system. And any if sales made outside to such customers, a log file will be created and will be sent to the auditor.