Day 7 (26 Oct 2022)

Yesterday Thao have taught me the GL test and today she will continue to teach me the other CAATs tests which are the three way, aging and payroll test. For the three way test, it can further categorized into purchase or sales three way test. The table below show the objectives for the both sales three way test and purchase the way test.

Put it simply, the three way test is to use the invoices and check whether it has the respective purchase order and good receive notes or not, for the sales three way, it will be sales invoices to check with its respective sales order listing and deliver order listing. This testing is to ensure the transaction is not a fictitious transaction, imagine that there is a purchase invoice but there is not purchase order can be found for that respective purchase invoice, it may indicate a fraud for the clerk to made up a purchase invouce and steal the company money, same go to sales, imagine there is a sales invoice, but it does not have a sales order, it can be a fraud for the clerk to made up a sales invoice. However, Thao also told me that this three way testing is only applicable for trading or manufacturing business, if it is a service busincess, hence we can not use the three way test as normally for service business, it does not have any purchase order or sales order. I go through the slide and inside there are steps showing me how to conduct the test from A to Z. Generally it is using the ‘join’ function to link all the three document together via the ‘bridge’ (it can be invoice number) and the formula will then calculate how many transaction are without the respective purchase order or sales order.

Moving to the next test is aging test. The objective of this test is to check the accuracy of payable or receivables ageing report and applicability of system on credit terms. By doing the test, we will re-calculate the aging by using the their outstanding invoices, after that will compare with client prepared aging summary, the identified variance might indicate that client have record the sales or purchase inaccurately.

The last test is payroll test, its objective is to test the accuracy of salary payment, payments to fictitious employees and detect ghost employees, the test will require us to use the salary listing of the employees and then compare with the attendannce of the employees, if there is salary paid to employee but according to the attendance he is actually resigned already, so this might indicate a fraud. I have go through the slide and also listening to what Thao explained to me, Thao also mentioned beside the test she taught me there are a lot more test like NRV test and so on, but she will not going to teach me as this kind of test are not that necessary.

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Main things that have learnt

• Go through CAAT slide

• Briefed about the three way test, aging test and payroll test

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Comment/idea/opinion

What Thao taught me today have bring me back the memories when I am taking the course Information System Audit, there is also one chapter is about the CAATs in which we are also require to perform certain CAATs test as to complete our assignment, during that time I think CAATs is of not necessary because we can do the audit manually, but when intern I start to realise CAATs and the tools are necessar, it is because when auditing a publis listed company, their transactions are of extremely large amount, CAATs will be a very useful tool as it can help the audit to be more inclusive.