Training Session

Information Analysis
for Auditors
Audit Information and its analysis for
forming opinions through spreadsheets

Session 1

Presenter:
Altaf Noor Ali
Chartered Accountant

1
 1 Session 9.30 -11.30 =
st

120 min
Information Analysis: Basic
1. Session Objective
2. Computer based accounting
systems
3. Excel Application in audit
performance
4. Excel menu: A run down
5. Must-know Excel features:
Range Format Charts
Functions
6. Preparing spreadsheets:
Common errors
7. Documentation of Software
Files prepared during audit:
Uses and challenges 2
 Session Objective

1. Describe the importance of

data in electronic form from
accounting and audit: writing
without pen
2. How electronic capture of
data has influenced the
accounting and audit
practices?
3. Make participants familiar with
Excel, and its practical
application in audits

3
Computer-based Accounting
Systems

1. How is it different from

manual accounting?
2. What are the threats and
opportunities?
3. Are computer-based
accounting systems being
utilised optimally by users?
How it affects the work of
auditors?
4. What is the relationship
between the quality of
accounting and the quality of
audits?
4
 Limitations of
Computer-based Accounting
Systems
1. Client-specific, not standard
2. Learning requires time and
effort
3. Flexibility like charting is not
available
4. Client reluctant to provide
access
5. Heavy files in terms of
storage

5
 Audit evidence 500

1. The auditor should obtain

sufficient appropriate audit
evidence to be able to draw
reasonable conclusions on which
to base the audit opinion.
2. When information produced by
the entity is used by the auditor
to perform audit procedures, the
auditor should obtain audit
evidence about the accuracy and
completeness of the information.

6
 Audit Evidence: Principles
p.9
Following generalizations about the reliability of
audit evidence may be useful:
1. Audit evidence is more reliable when it is
obtained from independent sources outside
the entity.
2. Audit evidence that is generated internally is
more reliable when the related controls
imposed by the entity are effective.
3. Audit evidence obtained directly by the
auditor (for example, observation of the
application of a control) is more reliable than
audit evidence obtained indirectly or by
inference (for example, inquiry about the
application of a control).
4. Audit evidence is more reliable when it exists
in documentary form, whether paper,
electronic, or other medium (for example, a
contemporaneously written record of a
meeting is more reliable than a subsequent
oral representation of the matters
discussed).
5. Audit evidence provided by original
documents is more reliable than audit
evidence provided by photocopies or
facsimiles. 7
 Core Audit Techniques for
Obtaining Audit Evidence

1. Inspection
2. Observation
3. Inquiry and Confirmation
4. Recalculation
5. Reperformance
6. Analytical Procedures
7. Reconciliation
8. Intuition

8
 Core Audit Technique:
Inspection [examination,
checking]
1. Inspection consists of examining
records or documents, whether
internal or external, in paper form,
electronic form or other media.
2. Inspection provides audit
evidence of varying degrees of
reliability, depending on their
nature and source.
3. Inspection of internal records and
documents is critically dependant
on the effectiveness of the
controls over their production.

9
 Core Audit Technique:
Observation [witnessing]

1. Looking at a process or
procedure being performed by
others.
2. Example: observation of the
counting of inventories by the
entity’s personnel,
disbursement of payroll,
preparing financial statements
from internal reports.
3. Provides real time insights
into issues.

10
 Core Audit Technique:
Inquiry [seeking
information]
1. Inquiries may range from formal
written inquiries to informal oral
inquiries. Evaluating responses in
inquiries is an integral part of the
inquiry process.
2. Responses to inquiries may
provide a basis for the auditor to
modify or perform additional audit
procedures.
3. Inquiry alone would not provide
sufficient audit evidence to detect
material misstatement at the
assertion level.

11
 Core Audit Technique:
Confirmation [seeking info
directly]
1. Confirmation is the process of
obtaining a representation directly
from a third party.
2. For example, the auditor may
seek confirmation of receivables
by communication with debtors.
3. Confirmations can also be about
terms of contract or any
modifications have been made to
the agreements or transactions
and entity has with third parties or
absence of side agreement.

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 Core Audit Technique:
Recalculation [accuracy]
and Recompute
1. This consists of checking the
mathematical accuracy of
documents or records.
2. Actually, it should also be
about its completeness.

13
 Core Audit Technique:
Reperformance [re-do]

1. Independent execution of
procedures or controls that
were originally performed as
part of the entity’s internal
control.
2. Preparing bank reconciliation,
not simply checking the one
provided to you.
3. Constructing a bill based on
the contract and then
checking it with the actual
one.
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 Core Audit Technique:
Analytical Procedures
[understand the big picture]
1. Study of data and inter-relating its
components in an effort to
understand the whole picture.
2. Evaluating financial information
made by a study of plausible
relationships among both financial
and non-financial data.
3. Investigation of identified
fluctuations and relationships that
are inconsistent with other
relevant information or deviate
significantly from predicted
amounts.

15
 What is a ‘Reconciliation’?

 Bank reconciliation
 Account Reconciliation with
debtors and creditors on
receiving confirmation
 Payroll reconciliation

Its main strength is that it

highlights the changes and
links it mathematically.
Its disadvantage is the
tremendous effort.

16
 Intuition

1. Not listed as an audit

procedure, however, a trained
judgement results in intuition
2. Intuition is not a systematic
process
3. It draws inspiration from
varied sources

17
Excel Application in Audits:

Which one?
Core Audit Procedures for Obtaining
Audit Evidence
1. Inspection
2. Observation
3. Inquiry and Confirmation
4. Recalculation
5. Reperformance
6. Analytical Procedures
7. Reconciliation
8. Intuition

18
 Excel Application in
Audits:
Which one?
ALL. Key = Evidence = 8
Core Audit Procedures for
Obtaining Audit Evidence
1. Inspection
2. Observation
3. Inquiry and
Confirmation
4. Recalculation
5. Reperformance
6. Analytical Procedures
7. Reconciliation
8. Intuition

19
 Excel Application in
Audits
1. Checking calculations [any stage of audit,
most common]
2. Preparing schedules
3. Recording Conduct of Test
4. Generating random numbers for audit
sampling
5. Analysing information
6. Importing/exporting data to other applications
[final audit]

20
Excel Application in Audits
Conclusion
1. What are the limitations in using excel?
1. Excel is application-specific rather than needs-
specific. Example: a user would pick up a
feature of excel and apply it to get a specific
task done say a chart
2. The users’ limitation of knowledge about its
application becomes its limitation
2. A lot of accounting related work happens
outside the computer based accounting
system for which excel is used extensively
3. Using excel is easier than manual writing as
you use a keyboard and much legible.

21
Excel menu: A run down
Key: Spreadsheet = 9
1. File
2. Edit
3. View
4. Insert
5. Format
6. Tools
7. Data
8. Window
9. Help

22
Must-know Excel features:
Range Format Charts
Functions TTS
1. Range: Name
2. Format: Numbers after decimal,
percentage, date, customise
3. Find and Replace: Using
alphabets and replacing them
4. Chart: Displaying graphs visually
5. Functions: Sumif, lower,
6. Linking: For easy navigation
7. Text to Speech: The computer
speaks
8. Changing global settings of
worksheets

23
Preparing spreadsheets:

Common errors
1. Directory: Storing in the wrong place
2. Filename: Using different conventions,
incorrect names
3. Leaving lines between data: As on paper
4. Not defining ranges and working with them
in formulas: making formulas easy
5. Not defining data and formulas columnsl
6. Not using tts
7. Not reviewing work
In short, not optimising the use of features
already provided in the excel

24
 Documentation of
Software Files prepared
during audit:
Uses and challenges

1. Constant changes – final file?

2. Separate client directory
3. Standard file name standard
4. No documentation on working
paper file
5. Remedy: print directory, file
name and time)

25
End of Session 1

Thank you

26
 Training Session
Information Analysis
for Auditors: Database
Having a dialogue with the data,
analysing data, drawing conclusions
and having error-free data

Session 2

Presenter:
Altaf Noor Ali
Chartered Accountant

27
2nd Session 11.30 -1.30 = 120
min
Information Analysis:
Converting Data into a Database
1. Session Objective
2. Questions about a set of data
3. Example: Data to Database
4. Using ‘AutoFilter’ feature
5. Interrogating data
6. Learning from data
7. Transforming data
8. Conclusion

28
 Session Objective

1. The difference between data

and database
2. Converting data into a
database
3. Illustrate use of autofilter tool
for interrogating data
4. Drawing proper conclusions

29
Questions about a set of
data
1. Maximum value
2. Minimum value
3. Values falling within a range
4. Locating a particular record
5. Aggregating data
6. Organising and editing data
7. How accurate is the data?

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 Example: Data to
Database
1. A set of data when organised
in a certain form is called
database. In other words,
database is data laid out in a
systematic manner
2. Database allows new insights
into data, it allows
interrogating of data which is
the most powerful tool in a
spreadsheet

31
Using ‘AutoFilter’ feature

1. A data needs to be bought in

a certain format to enable it to
be converted into a database.
For example, for each
column, the title of top row is
expressed as a single name
and there should be no blank
lines between the rows
2. The use of auto filter enables
data to be seen and
understood in a new light

32
 Interrogating data

1. Likeness: Star Trek type

computer, ask any question and it
responds
2. Converting data into a database
allows data to be interrogated
and understood well by the user
3. This happens because a user is
able to put questions about the
database and consider responses
4. Quality of data is enhanced while
reviewing and errors corrected

33
 Learning from data

1. Asking the right questions

2. Having the competence of
designing right questions
3. Above Below
4. Top ten
5. Customise your queries
6. Collecting responses

34
 Transforming data

1. The computer based accounting

system should be capable of
exporting data to the excel
2. The data may not appear in a
readily useable position
3. You should be mentally prepared
to convert data into a database.
This may involve deleting lines
between data, deleting blank
columns, bringing text into lower
case for easy reading, finding
replacing certain text, increasing
row width, reformatting date,
converting numbers into
formulas, etc.

35
 Conclusion

1. Every auditor should know

how to convert data into a
database
2. Auditor should make the best
use of features offered by
excel to reach to audit
conclusion, primarily through
understanding the relevant
data

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End of Session 2

Thank you

37
 Training Session
Information Compiling
for Auditors
Developing a model accounting system on
excel

Session 3

Presenter:
Altaf Noor Ali
Chartered Accountant

38
3rd Session 2.30 - 4 = 90 min
Information Analysis:
Using excel for information
compiling
[an excel based model stand alone
accounting system]

1. Session Objective
2. Skills you require
3. Practical Example: From set-
up to financial statements
4. Common errors
5. Conclusion

39
 Session Objective

1. If all computer based accounting

systems are databases, whynot
use excel features to develop a
reasonable accounting system?
2. Sharing the experience of
developing a stand alone
accounting system on excel
3. Can you do it?

40
 Skills you require

1. Some basic accounting

concepts
2. Basic spreadsheet skills, as
described ahead
3. Learning capacity [investment
in terms of time]
4. Practice [hardware and
software]
5. Ability to find and correct your
own mistakes [undertaking
painstaking checking]

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Practical Example:

From set-up to financial

statements

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 Basic Set-up

1. Separate worksheet for each bank

account
1. Restricting chart of accounts to about
50 accounts
2. One worksheet for passing journal
entries
3. One worksheet for summarising
balances
4. One worksheet for balance sheet
5. One worksheet for income and
expenditure
6. One worksheet for notes to the
accounts

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 Limitations

1. Restricted chart of accounts

2. No real accounts [debtors and
creditors]
3. No fixed assets register
4. No separate bank book to save
on bank reconciliation
statement
5. No other subsidiary vouchers
like debit and credit note
recording

44
 Strengths

1. Acceptable legally
2. Small memory size
3. Easily edited, better quality,
error fixing is easier.
4. Analysis is easier through
charts
5. Data can be easily exported
to word etc.

45
 Model Sequence

1. Enter bank transactions

2. Verify Voucher
3. Code transactions
4. Adjusting entries worksheet
5. Consolidation
6. Find errors, making
corrections
7. Analytical review, editing text
8. Compile financial statements

46
 Common Errors

1. Inserting lines below the

range
2. Redefining codes
3. Sub-group codes
4. Editing initial text inputs
5. Verification and reviews
6. Self-review threat

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 Conclusion

1. It is possible to build a
reasonable accounting
system on excel
2. This capability may be used
for limited verification of
processing of main computer
based accounting system

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49
End of Session 3

Thank you

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