'Audit reviewed 50 transactions and noted one transaction that was processed incorrectly' When the check bounced, the participant's policy was retrospectively terminated, but the claim was still paid costing the company hundreds of thousands of dollars per year. Then after paying the claim the participant's check bounced. The insurance company, having received a payment, paid the claims. The reason why they were paid was because the participant paid their premium. Furthermore, the auditor was able to identify the reason why these claims were paid. Using CAATTs the auditor was able to identify every claim that was paid and the exact dollar amount incorrectly paid by the insurance company. In a real life audit, the CAATTs auditor noted that a number of claims had been paid after policies were terminated.

If they were, the auditor can then figure out why the controls to prevent this failed. The auditor then can determine if any claims were inappropriately paid. Using CAATTs the auditor can select every claim that had a date of service after the policy termination date. Since the insurance company might process millions of claims the odds that any of those 30-50 'randomly selected' claims occurred after the policy was terminated is extremely unlikely.

The auditor would 'randomly select' a 'statistically valid' sample of claims (usually e if any of those claims were processed after a policy was terminated. Using traditional audit techniques this risk would be very difficult to test. For example, an insurance company may want to ensure that it doesn't pay any claims after a policy is terminated. Traditional audit vs CAATTs on specific risksДЄnother advantage of CAATTs is that it allows auditors to test for specific risks. The auditor will then test that data to determine if there are any problems in the data. Using CAATTs the auditor will extract every transaction the business unit performed during the period reviewed.

A well designed CAATTs audit will not be a sample, but rather a complete review of all transactions. CAATTs, as it is commonly used, is the practice of analyzing large volumes of data looking for anomalies. CAATTs alternativeД¬AATTs, not CAATs, addresses these problems. The traditional method of auditing allows auditors to build conclusions based upon a limited sample of a population, rather than an examination of all available or a large sample of data. Traditional auditing vs CAATs Traditional audit example

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