Computer Assisted Random Sampling is a set of transactions that occurred throughout the audit period are sampled instead
of choosing a “block” of transactions during specific time periods. Composite data is analyzed and stratified to create sets of
transactions called stratum. Data is stratified so that individual transactions relate directly in importance to the entire
population. Standard scientific sampling techniques are employed, consistent with Generally Accepted Accounting
Principles, to derive a sample population of the strata. Transactions are selected on a random basis throughout each
stratum. The result is a sample that represents all the transactions within audit population.
Source: Commonwealth of Massachusetts (2006) A Guide to Computer Assisted Audit Techniques [online]. Available from:
https://www.mtc.gov/uploadedFiles/Multistate_Tax_Commission/Audit_Program/Resource/caat.pdf [Accessed on: August
2021].
Sampling of data is vital in Computer Assisted Auditing. Test data is typically used as a technique.
Discuss the advantages and disadvantages of the test data technique.
5.1 (10 marks)
While Computer Assisted Audit Techniques (CAAT) have distinct advantages for Auditors, there is
potential for it to go wrong very quickly if certain safeguards are not taken. Propose and explain at
least five (5) safeguards that Auditors need to take while undertaking an Audit using CAAT.

Answer rating: 100% (QA)

Solution Step 1 Advantages and Disadvantages of Test Data Technique The test data technique is a common method used in Computer Assisted Auditing to evaluate the accuracy and reliability of an informa... View the full answer