THE EFFECT OF COMPUTER ASSISTED AUDIT TECHNIQUES (CAATS) ON

THE PERFORMANCE OF AUDIT FIRMS IN PORT HARCOURT

BY

DEEDENWII, BARITURE NEELE

BEING A RESEARCH CARRIED OUT IN PARTIAL FULFILMENT OF THE

REQUIREMENT FOR THE AWARD OF THE NATIONAL DIPLOMA (ND) IN
ACCOUNTANCY DEPARTMENT,SCHOOL OF MANAGEMENT SCIENCE
KEN SARO-WIWA POLYTECHNIC BORI.

OCTOBER 2016

DECLARATION

1
I DEEDENWII, BARITURE NEELE of the Department of Accountancy,

Ken Saro Wiwa Polytechnic, Bori do solemnly swear and declare that

this research project was solely and originally done by me and has not

been submitted for National Diploma Polytechnic or any Accountancy

programmed elsewhere.

……………………………………… …………………………….
DEEDENWII, BARITURE NEELE DATE
(PROJECT RESEARCH)

2
 CERTIFICATION

This is to certify that this project work was carried out by

DEEDENWII, BARITURE NEELE. In the Department of Accountancy,

School of Management Sciences Ken Saro-Wiwa Polytechnic, Bori.

Under the supervision of Wadike George C. and is to submitted in

partial fulfilment of the requirement for the award of national diploma

(ND) in accountancy.

_______________ _________
Wadike George C. Date
Project supervisor

_______________ _________
Ogwo, Chukwu J. Date
Head of Department

________________ _________
Davies, Stanley Diepreye Date
Project Co-Ordinator

3
 DEDICATION

My special dedication goes to God Almighty, who is the brain success of

this work and to my Mum Mrs. DEEDENWII, NEELE GIFT for her

support and care towards my academic pursuit.

4
 ABSTRACT
This research work was conducted to investigate the effect of
computer assisted audit techniques (CAATs) on the performance of
audit firms in Port Harcourt. The main objective of this study was to
examine the relationship between significant relationship between
usage of computer assisted audit techniques and performance
expectation in Nigeria. Hypothesis was set forth and tested using
multiple regress output. The data collected from the questionnaire
were analysed using relevant descriptive statistics diagnostic tests,
augmented dickey-fuller and multiple regressions. The result revealed
that performance expectancy, effort expectancy, facilitating
conditions and social influence were positively associated at (0.05) to
the usage of computer assisted audit techniques by accounting firms.
The syllabus of accounting programmers for professional and tertiary
institutions should be reviewed to include courses in computer
accounting information system audit; relevant professional accountancy
bodies in Nigeria should include course in computer inform at/on
systems and audit as part of their training programmes and
professional accountants should be made to appreciate the relevance
of computer in the 215t century business environment in the provision
of relevant accounting services for the sole aim of satisfying their
clients and also audit firms need to increase their organizational and
technical support to encourage the use of CAATs.

5
 TABLE OF CONTENTS

TITLE PAGE - - - - - - - - - i

DECLARATION - - - - - - - - - ii

CERTIFICATION - - - - - - - - iii

DEDICATION - - - - - - - - - iv

ACKNOWLEDGEMENT - - - - - - - v

ABSTRACT - - - - - - - - - vi

TABLE OF CONTENTS - - - - - - - vii

CHAPTER ONE
1.0 INTRODUCTION - - - - - - - 1
1.1 BACKGROUND OF THE STUDY - - - - - 1
1.2 STATEMENT OF PROBLEM - - - - - 5
1.3 OBJECTIVE OF THE STUDY - - - - - 6
1.4 RESEARCH QUESTION - - - - - - 7
1.5 RESEARCH HYPOTHESIS - - - - - - 8
1.6 SIGNIFICANCE OF THE STUDY - - - - 9
1.7 SCOPE OF THE STUDY - - - - - - 10
1.8 LIMITATIONOFTHESTUDY - - - - - 11
1.9 DEFINITION OF TERMS - - - - - - 12

CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION - - - - - - - 15
2.2 DEFINITION OF COMPUTER ASSISTED
AUIDT TECHNIQUES - - - - - - 16
2.3 COMPUTER ASSISTED AUDIT TECHNIQUES (CAATS) 18

6
2.4 CLASSIFICATION OF CAATS - - - - - 19
2.4.1 AUDIT SOFTWARE - - - - - - - 19
2.4.2 OTHER TECHNIQUES - - - - - - 22
2.5 TYPES OF COMPUTER ASSISTED
AUDIT TECHNIQUE (CAATS) - - - - - 23
2.6 INTERNAL CONTROL OVER COMPUTER - - - 25
2.7 TECHNIQUES USED BY AUDITORS TO RECORD AND
EVALUATE MANUAL AND COMPUTER
BASED ACCOUNTING SYSTEMS - - - - 26
2.8 PURPOSE OF TESTS OF CONTROL - - - - 28
2.9 NATURE OF TEST OF CONTROLS - - - - 29
2.10 SYSTEMS DEVELOPMENT - - - - - - 30
2.12 REVIEW AND MAINTENANCE - - - - - 30
2.13 ADVANTAGES OF COMPUTER ASSISTED AUDIT
TECHNIQUES - - - - - - - - 32
2.14 TYPES OF AUDIT PROGRAMS ACT - - - - 33
3.15 COMPUTER AUDIT ACTIVITY AND PERFORMANCE - 34
2.16 BENEFIT OF USING CAATs - - - - - 35
2.17 THE CAATS DOCUMENTATION AND REPORTING
CAATS DOCUMENTATION - - - - - 35
2.18 CONCEPTUAL FRAMEWORK - - - - - 37
2.19 EMPIRICAL STUDIES - - - - - - 38

CHAPTER THREE
RESEARCH METHODOLOGY
3.0 INTRODUCTION - - - - - - - 39
3.1 RESEARCH DESIGN - - - - - - - 40
3.2 POPULATION OF THE STUDY - - - - - 41
3.3 SAMPLE/SAMPLING TECHNIQUES - - - 42

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3.4 INSTRUMENT OF DATA COLLECTION - - - 42
3.4.1 DATA COLLECTION PROCEDURES - - - - 43
3.5 MODEL SPECIFICATION - - - - - - 43
3.6 DATA ANALYSIS - - - - - - - 44

CHAPTER FOUR
DATA PRESENTATION AND DATA ANALYSIS
4.1 INTRODUCTION - - - - - - - 46
4.2 DATA PRESENTATION - - - - - - 46
4.2 DATA ANALYSIS - - - - - - - 47
4.3 HYPOTHESIS TESTING - - - - - - 53

CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 SUMMARY - - - - - - - - 61
5.2 CONCLUSION - - - - - - - - 62
5.3 RECOMMENDATION - - - - - - 63
REFERENCES - - - - - - - - - 65
APPENDIX 1 - - - - - - - - 70
APPENDIX 2 - - - - - - - - 71

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 CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The nature of computer based accounting system is such that the

auditors are afforded opportunities to use either the enterprises

or another computer to assist them in the performance of their

audit work. The techniques performed with computer in this way

are known as “computer assisted audit techniques (CAATs)”.

The questions we all need to ask ourselves: how did auditing

start? Why did it start?

It is interesting to note that stewardship as long as it exist was

the starting point for auditing: For decades, great landowners

would not manage their own land but would appoint persons called

stewards to manage the land and later the stewards gives account

to the owner. This evolved into what we have today, company’s

9
owned by shareholders. It is expected that at the end of a

particular year, the directors give account to the shareholders.

This reporting and accounting is usually done by means of

financial statement.

The place of the auditor in the 21st century with respect to

computer

Assisted Audit techniques (CAATS) is very important in modern

times for the purpose of achieving short and long term

objectives. Virtually all enterprises now have at least, their

accounting records on computer.

The audit profession is rapidly advancing in response to change in

its environment.

According to Solomon and Trotman (2003); It is argued that

auditors are struggling to maintain their identity and purpose as

the organizations, there audit undergo changes.

10
As advance information changes occur more quickly, auditors must

keep pace with emerging technology changes and their impact on

their clients computerised accounting systems Malizam and

Veerankutly (2011)

One ways of achieving and understanding clients computerised

accounting systems is the adoption of computer assisted audit

techniques and tool (CAATS) in their day to day operations. In

planning the audit, the auditor should consider how the presence

of a computer information system may affect the clients

accounting and internal control system and the conduct of the

audit.

Computer assisted audit techniques normally includes using basic

office productivity software such as spreadsheet, word

processors and text auditing programs and more advanced

software packages involving use of statistical analysis. Computer

assisted audit techniques is the fundamental control which is

11
used by the auditors. These tools facilitate them to make search

from irregularities from the given data. With the help of this

tool, the auditors and accountant of any firm will be able to

provide more analytical results.

Computer assisted audit techniques (CAATS) generally assist the

auditors in testing application controls. Many of their controls are

embedded into the Clients computer programs.

Additionally, the auditor may need to use computer assisted audit

techniques to execute substantive test when the information in

maintained in the machine readable form.

The types of computer assisted audit techniques are categorized

in the appendix to the operation auditing guideline on computer

assisted audit techniques (CAATS) and it’s categorization are as

follows;

1. General audit software

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 2. Parallel simulation

3. Custom audit software

4. Integrated test facility

5. Concurrent auditing techniques

According to singleton and flesher (2003), computer assisted

audit techniques (CAATS) are computer tools that an auditor

uses as part of their audit procedures to process data of audit

significance contained in an entity information system.

1.2 STATEMENT OF PROBLEM

Computer assisted audit is relatively new in Nigeria environment

and over auditors used to manual procedures with little or no

training in computer audit. Due to the complexity of statement

and CAATS has become an important sound framework should be

introduced on how computer assisted audit techniques can be

handled effectively to achieve the organizational goal. Pranjal

13
 (2010) opined that the accountant of today now use computer to

handle their accounting data for example financial statement,

information of audit significance contained in the entity’s,

electronic working papers, fraud detection, information retrieval

and analysis network, security, continuous monitoring, audit

reporting data base of audit history, computer based training,

electronic commerce and internal securities. Auditors are

increasingly aware of the fraud committed by computer

operators, thus the study focus on the challenges posed by the

Electronic data processing (EDP) as it relates to accounting

management.

1.3 OBJECTIVE OF THE STUDY

Much has been written on computer assisted audit techniques

(CAATS) generally but with little references to the performance

of audit firms.

14
 1. To examine the adoption of computer assisted audit techniques

by public accounting firms in Nigeria.

2. To assisted researcher and practitioners to increase the usage

of CAATS in Nigeria.

3. To examine the cause of not obtaining enough techniques used

as evidence.

4. The purpose of achieving short and long term objectives of

modern business organization.

1.4 RESEARCH QUESTION

In order to carry out this research study to its logical conclusion,

the following research question was designed;

1. Does the use of CAATS affect any other aspect of the audit

process?

2. Does CAATS have any role to play in the detection of fraud in

an organization?

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 3. To what extent do auditors usage of computer assisted audit

techniques in performance expectations in Nigeria?

4. To what extent do auditors usage of computer assisted audit

techniques in effort expectancy in Nigeria?

1.5 RESEARCH HYPOTHESIS

Observation where also carried out on how CAATs are instituted

and operated in the organization and companies.

The following research hypothesis will enable us to determine the

relationship between the variables.

H01: CAATS have no role to play in the detection of fraud in an

organization.

H02: CAATS have role to play in the detection of fraud in an

organization.

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 H03: There is no significant relationship between usage of

computer assisted audit techniques and performance

expectation in Nigeria.

H04: There is significant relationship between usage of computer

assisted audit techniques and performance expectation in

Nigeria.

1.6 SIGNIFICANCE OF THE STUDY

This research work aims to promote audit efficiency and

effectiveness in the company. The study will expose problems

face by the system operators in instituting an effective

performance of audit firms.

To the researcher, it is significance not only because it satisfies

company requirements but also enables the audit to look at the

entity’s information of the system and to increase the usage of

CAATS and some basic problems of the accounting system and

financial statement if not eliminate, and or detect errors,

17
 possible frauds and or frauds and aid to ensure reliance on, for a

proper accounting decision making and a smooth audit and in all

growth of the entire organization.

1.7 SCOPE OF THE STUDY

Computer assisted audit techniques (CAATS) are computer

programs and data that the auditor uses as part of audit

significance contained in a client compute information system

(CIS). CAATS can be portrayed as the techniques used to

examine directly the internal logic of an application as well as

being used to draw indirectly entrance about application logic

Hall, (2000).

Moorthy et al (2011), Stated that CAATS can be used to increase

audit courage, improve the integration of audit skills, strength

independence of auditing from information system functions,

foster greater credibility and increase cost effectiveness

18
 through the development of reasonable computerisation

techniques.

1.8 LIMITATIONOFTHESTUDY

The following limitation of CAATS underline it’s usefulness as a

means of collecting evidence on the reliability of information

systems. Some respondents were so reluctant in completing their

questionnaires, this act as a limitation to the study. Some of

them avoided some questions purposely by leaving spaces blank.

An ideal research work is one, which is capable of attaining an

overall and through courage of the entire audit work under study.

However, this was not possible due to the difficulty of soliciting

information system, there was secrecy exhibited in certain

computer assisted audit techniques of their operation thus, as a

hindrance to this extensive study.

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1.9 DEFINITION OF TERMS

Fraud: Fraud is referred to as an international act

by one or more individuals among

management, employees or third parties,

which result in a misrepresentation of

financial statements.

CAATS: Computer assisted audit techniques is an

audit pack that requires a simple of

transactions taken by the auditor which

include valid and invalid and exceptional

data with manually computed solutions. Also

it is a computer programs and data that the

auditor uses as part of the audit

procedures to process data of audit

significance contained in a client computer

information system (CIS).

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Audit Software: It is a generic term used to describe

computer programs designed to carry out

tests of control and/or substantive

procedures.

Audit: An audit is a conscientious and objective

examination of an enquiry into, any

statement of underlying documents, and

the physical assets where possible, as would

enable the auditor form a opinion as to

where or not the statement of account

present are true and fair view of whatever

it purports to present and to report

accordingly.

Computer Audit: This is a systematic and logical process

that follows a risk based approach to

determine whether the information

21
 systems of an entity including it’s detailed

information technology process, controls

and activities, will achieve its IT objectives

and will ultimately enable the organization

to achieve their organizational goals.

Performance: An activity (such as working etc) that a

person or group does to entertain an

audience and the act of doing a job, an

activity etc.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 INTRODUCTION

The purpose of auditing financial statements is to determine

whether financial statement were prepared in accordance with

specified criteria such as generally accepted accounting principles

by Messier, Arens and Loebbecke. In other words auditors are to

make sure that the financial statement and other forms of

information provided by the companies being audited can be

trusted by people who want to make use of these statements.

Most business organizations world over have computerized their

accounting system. Extant literature finds that the use of

computer assisted audit techniques (CAATS) is positively related

to the quality of audit reports. CAATS are widely applied to audit

financial statements in developed countries. However, there is a

23
 void in literature review about the audit of computerized

accounts in developing countries.

The aim of this chapter is to describe some of the related

literature with reach that are considered for the study.

2.2 DEFINITION OF COMPUTER ASSISTED AUIDT

TECHNIQUES

CAATS are “techniques that use the computer as an audit tool”

which are utilized in application of auditing procedures (Braun and

Davis, 2003; 1 AASBM 2003; ISACA, 1998). CAATS are

computer programs and data that the auditor uses as part of the

audit procedures to process data of audit significance contained

in a client computer information system (CIS)

Additionally, the auditor may need to use computer assisted audit

techniques (CAATS) to execute substantive test when the

information is maintained in machine readable form.

24
The nature of computer-based accounting system is such that

auditors may use the audit client company’s computer, or their

own, as an audit tool, to assist them in audit procedures the

extent to which audit may choose between using CAATS and

manual techniques on a specific audit engagement depends on the

following factors.

 The practically of carrying out manual testing

 The cost effectiveness of using CAATS

 The availability of audit time

 The availability of the audit clients computer facility

 The level of audit experience and expertise in using a specified

CAATS

 The level of CAATS carried out by the audit client’s internal

audit function and the extent to which the external auditor can

rely on this work.

25
2.3 COMPUTER ASSISTED AUDIT TECHNIQUES (CAATS)

The nature of computer-based accounting system is such that

auditor has to make use of the clients computer (or another

computer) including the master files and programme in the

performance of the audit work. Techniques performed with

computer in this way are be known as Computer Assisted Audit

Techniques (CAATS). CAATS may be used in the following:

1. To overcome the problem of loss of audit trail.

2. Use for substantive testing

3. Used for the examination of accounting records maintained on

computer files

4. May assist in the performance of compliance test

5. May assist in analytical review procedures where the auditor

wishes to place reliance on internal controls.

26
2.4 CLASSIFICATION OF CAATS

There are three classification of CAATS –namely

 Audit software

 Test data

 Other techniques

Dealing with each of the above in turn

2.4.1 AUDIT SOFTWARE:

Audit software is a generic term used to describe computer

programs designed to carry out tests of control and/or

substantive procedures. Such program may be classified as:

 Packaged programs: These consist of pre-prepared

generalized programs used by auditor and are not ‘client

specific’.

27
  Purpose written programs: These programs are usually ‘client

specific’ and may be used to carry out tests of control or

substantive procedures.

 Enquiry programs: These programs are integral to the client’s

accounting system; however they may be adapted for audit

purposes.

TEST DATA

AUDIT TEST DATA

Audit test data is used to test the existence and effectiveness

of controls built into an application program used by an audit

client. As such, dummy transactions are processed through the

client’s computerized system.

The auditor uses test data for testing the application controls in

the client computer programs in using this method; the auditor

first creates a set of simulated data (that is test data) for

processing. The data should include both invalid data. The objective

28
 of using the test data is to ensure the accuracy of the computer

processing of transactions.

FLOWCHART OF TEST DATA METHOD

Create Test Data

Determine processing result

Input

Master file-application programs

Compare

Follow up on
Processing

Integrated test facilities: To avoid the risk of computing a

client account system, by processing test data with the clients

over ‘live’ data, auditors may instigate special ‘test data’ only’

processing runs for audit test data.

29
2.4.3 OTHER TECHNIQUES

This section contains useful background information to enhance

your overall understanding.

OTHER CAATS INCLUDE:

Embedded Audit Facilities (EATS) This technique requires the

auditor’s own program code to be embedded (incorporated) into

the clients application software, such that verification

procedures can be carried out as required on data being

processed.

Application Program Examination: When determining the extent

to which they may rely on application controls, auditors need to

consider the extent to which specified controls have been

implemental correctly.

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2.6 TYPES OF COMPUTER ASSISTED AUDIT TECHNIQUE

(CAATS)

1. Generalized audit software (G.A.S)

2. Parallel simulation (P.A.S)

3. Custom audit software (C.A.S)

4. Integrated test facility (I.T.F)

5. Concurrent auditing techniques (C.A.T)

General audit software: These include programs that allow the

auditor to perform test on computer files and database. General

audit software was developed so that auditors would be able to

conduct similar computer assisted audit techniques in different

I.T environment.

Steps taken by an auditor in GAS

i) Set objectives of the application

ii) Test the emblematical accuracy of the accounts

iii) Code the instruction for the application

31
iv) Evaluate the result of the application

v) Verifying the output that tested the mathematical

accuracy of the accounts receivable, subsidiary ledge data

base.

ADVANTAGES OF GAS

i) it is easy to use

ii) limited IT expertise or programming skills are required

DISADVANTAGE OF GAS

It provides a limited ability to verify programming logic because

it’s application is usually directed to testing client files or

database.

2) Parallel Simulation

The use of parallel simulation requires that the auditor construct

a computer simulation that mimic the client’s productions

programs.

32
 3) Custom Audit Software

It is generally written by auditors for specific audit tasks such

programs are necessary when the entity’s computer system is not

compatible with the auditors general audit software or when the

auditor wants to conduct some testing that may not be possible

with the general audit software.

2.6 INTERNAL CONTROL OVER COMPUTER

The internal control over computer based accounting systems may

be considered under the following main headings

 Application control

 General control

Application control: This may be manual or programmed. It is

used to ensure completeness and accuracy of accounting records

and the validity of the entries made.

33
 General Controls: It relates to the environmental within which

computer based accounting are developed, maintained and

operated, and are applicable to all application.

2.7 TECHNIQUES USED BY AUDITORS TO RECORD AND

EVALUATE MANUAL AND COMPUTER BASED ACCOUNTING

SYSTEMS

In the types of CAATS of the auditing standard “the auditors

operational standard” starts if the auditor wishes to place

reliance on any internal controls, he ascertains and evaluates

these controls and performs compliance test on their operations.

The auditor needs to ascertain and record internal control

system in order to make preliminary evaluation of the effective

was of its components controls and to determine the extent of

his reliance on these controls this recording will normally be

carried out frequently with the recording to the accounting

system; the use of flowcharting technique is a simple yet

effective way of achieving this dual objective.

34
 Having documented the system, including internal controls and

confirmed his operation by means of walk through test, the

auditor will then commence his evaluation. The evaluation of

internal controls will be assisted by the use of documentation

designed to help identify the internal controls on which the

auditor may wish to place reliance such documentation can take

variety of forms but might be based on questions asking.

a. Whether control exist which meet specified control

objective

b. Whether they are controls which prevent or detect

particular specified error or omissions.

The two document referred to in terms of their objective in a and b

are more recognizable to the auditor as the internal control

questionnaire (ICQ) and internal control evaluation questionnaires

(ICEQ) other simpler techniques that may be used to record the

system of control include.

35
  Narrative notes

 Organization chart

2.8 PURPOSE OF TESTS OF CONTROL

The auditor is required to perform test of controls when the

internal controls are operating effectively or when substantive

procedures alone do not provide sufficient appropriate audit

evidence at the assertion level. They are tests to obtain audit

evident about the effective operation of the accounting and

control system.

TEST OF CONTROLS COMPRISES OF TESTING THREE

THINGS

1) Design that the internal controls are properly designed to

cover the risk. It is meant for (examined through ICQ’S

and ICEQS)

36
 2) Implementation that the internal controls have been put

into operation (examined through a walk through tests with

a little sample).

3) Operating effectiveness that the system of internal

control were operating effectively at relevant times during

the period (examined through a walk through tests with a

little sample)

2.9 NATURE OF TEST OF CONTROLS

TEST OF CONTROL WITH INVOLUE

a) Inquiry and observation e.g inquiry about and observation of

controls of over opening of mail to verity control of cost.

b) Re-performance e.g preparation of bank reconciliation

statement

c) Inspection of documentation relevant to performance of

controls

d) Applying CAATS

37
 e) Test of controls and test of details may be applied

simultaneously on the same transaction.

2.10 SYSTEMS DEVELOPMENT

When an audit client computerizes the business, the implications

for the auditors are great. The whole nature of the audit will

change and the auditors must obtain the required knowledge to

audit system the auditors may also be involved in the process of

installing a computer system by given advice and help. In any case,

the auditors will want to audit the implementation of a new

system as well as it’s continued e and maintenance.

2.12REVIEW AND MAINTENANCE

Ensure that the new system meets current objectives, and that it

continues to do so. The auditors reviewing the development

process will want to satisfy themselves that each of these stages

is being completed in a controlled manner with through coverage

of the issue involved and reasonable solutions. The influence of

38
the user on the development should be pervasive and the auditors

must ensure that this has been the case.

The auditors will be involved at the system design stage to check

that various rules are clearly established, for example specific

rules relating to access to different types of data. The auditors

should review the program specifications and ensure that they

are formally accepted by the programmer. The auditors should

also review the issuing of amendments to program specification

and satisfy them that they are being processed in a formal

manner.

Where the auditors are required formally to sign-off the system

they would only do so if they were satisfied that:

a) The system meets user requirements, and the programs,

which function satisfactorily and have been rested

thoroughly, have been developed with adequate controls

incorporated and are auditable.

39
 b) The waster files are complete and accurate

c) A satisfactory implementation program has been devised.

Implementation is often done in phases, possibly liked to a

phases, construction of the master files. Parallel running of the

old and new systems should occur, at least for the first sections

to be implemented until confidence is built up.

2.13ADVANTAGES OF COMPUTER ASSISTED AUDIT

TECHNIQUES

1. Increased Efficiency: This is one of the way in which an

audit can be achieved after an initial investment, a

reduction in transportation expenses achievable through

telecommunication or telework, the ability to more

effectively utilize areas of knowledge concentration and

also an increase in audit quality.

2. It enhances the interaction between auditors and managers

on a more formalized approach.

40
 3. Independently access the data stored on a computer system

without dependence on the client.

4. It tests the reliability of the client.

5. Increase the accuracy of audit test.

DISADVANTAGES OF COMPUTER ASSISTED AUDIT

TECHNIQUES

Loss of audit trail: the audit trail is used to trace individual

transaction through a system from a source document to

completion. Computer generated totals, analysis and balance

which are not printed out in detail because management is not

exercising control through verification of the individuals items

processed.

2.14TYPES OF AUDIT PROGRAMS ACT

Generalized packaged programs: however they need to become

tallored to each specific case by defining the format of the files

41
 to be interrogated by specifying parameters requires and the

form of the output.

Purpose written programs: these are specially written programs

where it is not possible to adopt a package program because of

the type of machine, processing or file organization used.

Utility programs used by the client: this is used by the entity

to perform data processing functions such as sorting and printing

of file e.g. excel.

3.15COMPUTER AUDIT ACTIVITY AND PERFORMANCE

CAATs assist internal auditor by automatically obtaining

complete data and executing analysis. Internal auditors can

repeat audit work be executing automatic audits, thereby

reducing audit time and costs. In actual cases, Slemens and Sonae

Distribulsao Brazil, and MTN Nigeria substantially reduced their

audit costs by employing computer auditing.

42
2.16BENEFIT OF USING CAATs

1. Increase audit and efficiency: CAATs perform huge volume

of transactions- better coverage and assurance obtained.

2. Improves Audit Effectiveness: joint, concentrate and

compare different files to quality findings, statistics before.

3. Enhance image of auditing: Move focus to areas where risk

were noted, back up findings with detail.

2.17 THE CAATS DOCUMENTATION AND REPORTING

CAATS DOCUMENTATION

Execution

 CAATs preparation and testing procedures and controls

 Details of the tests performed by the CAATs

 Details of input (e.g. data used, file layout), processing (e.g.

CAATs high-level flowcharts logic) and output (e.g. log files,

reports).

43
Audit Evidence

 Output produced

 Description of the audit analysis work performed on the output

 Audit findings

 Audit conclusions

 Audit recommendation

Planning

 CAATs objectives

 Control to be exercised

 Staff and filing

CAATS REPORTING

1. The audit report should contain a clear description of the

CAATS used

44
 2. The description of the CAATS should also be included in the

body of the report, where the specific finding relating to the

use of the CAATS is discussed.

2.18 CONCEPTUAL FRAMEWORK

Computer assisted audit

techniques

Financial management

Internal Control

Independent Variables Dependent Variable

The figure shows the presumed relationship between the set of

independent variables and the dependent variable. The

independent variables are application controls, computer assisted

audit techniques, and internal controls. On the other hand, the

dependent variable is financial management. The conceptual

framework guided the study in that the object was to establish

45
 to which extent the aforementioned independent variables

influence financial management in the Computer Assisted Audit

Techniques (CAATs).

2.19 EMPIRICAL STUDIES

There are several empirical studies on adoption of computer

assisted audit techniques (CAATs). Brain and Davis (2003) survey

governmental auditors regarding their usage of auditor command

language (ACL), a commercially available CAATs. They found that

while participants perceived the potential benefits associated

with audit command language they displayed a lower confidence in

their technical abilities to used ACL. Debrecency et al (2005)

studied bank internal auditors and external auditors in Singapore.

They found that auditor tend to use CAATs for special

investigations rather than as a foundation for their regular audit

assignment.

46
 CHAPTER THREE

RESEARCH METHODOLOGY

3.0 INTRODUCTION

Research methodology used by various researchers vary

according to the nature and scope of investigation and that

prompt an individual researchers to describe procedure adopted

and research technique used to validate the observation and

conclusions made from such facts. Also the chapter focuses

attention on the various methods adopted in carrying out the

study.

Accounting research demands practical approach in order to be

efficient and effective. To achieve this, the researcher took time

to formulate a practical research design which will facilitate the

collection and analysis of data in the most practical way.

47
3.1 RESEARCH DESIGN

Research design is the guideline which directs the

researcher towards solving the research problem. In the course

of this study the researcher will adopt survey method of data

collection. That means, data will be gathered from both primary

and secondary data using questionnaire method of data collection.

Anyanwu (2000), the method generally in use for survivor

research includes personal interviews, questionnaires, observation

telephone interview and panel techniques. Due to time constrains

and the type of research to be carried out, the researcher will

limit his research design to questionnaire and observation from

primary data.

Valuable data was obtained from 320 respondents giving response

rate 71% to mitigate bias in the findings, it made sure that half

the sample include auditors and the other half, research report

users. To be more explicits, 160 respondents were auditors and

48
 160 were audit users. The data were processed using SPSS.

Descriptive statistics were computed and correlation analysis was

done. However, strong conclusion cannot be made from afore-said

analysis.

3.2 POPULATION OF THE STUDY

This could be a group of persons, and companies etc.

According Nwoko and Olantian (1988), Population of a study

represents the target of the study as defined by the aims and

objectives of the study.

Also research population is an entire group of people, objects or

events, all having a least one characteristic in common, as stated

by Jacob (1976).

The target population of this study was all audit firms in Rivers

State. However, the accessible population was all accounting

firms in the Rivers State of Nigeria.

49
3.3 SAMPLE/SAMPLING TECHNIQUES

Simple random sampling technique was used to arrive at the

sample of the study. The sample size of 500 for the study was

derived from the application of Yaro Yamen model.

3.4 INSTRUMENT OF DATA COLLECTION

The instrument used for the data collection was developed to

examine the adoption of CAATs by auditors in public accounting

firms in the Niger Delta Region of Nigeria. This study used

instruments developed by Mahzan and Lymer (2008), vankatech

et al (2003) and Janvria et al (2008). The first part of

questionnaire examined the CAATs usage using 5 point scale of 1-

strong disagree, 3 – neutral, 4- agree and 5 – strongly agree for

each objective. The third part of the questionnaire examined the

UTAUTs elements using the same 5 point scale rated from

strongly disagree to strongly agree.

50
3.4.1 DATA COLLECTION PROCEDURES

A study of this type of presents a number of data collection

challenges. It requires as broad a sample as possible and at the

same time requires that each data point provide comprehensive

information or adoption of Computer Assisted Audit Techniques

by auditors in Nigeria. Thus, the sample was drawn from the

number of auditors practicing in public accounting firms, in Rivers

State of Nigeria. A total of two hundred and two (202)

questionnaires were received which represent a response rate of

forty percents (40%).

3.5 MODEL SPECIFICATION

In an effort to obtain strong results for the hypothesis tests, we

performed logical regression based on the following model.

Q = B0 + B1 CAATs + B2 B1g4 +B31C + e

Where

51
 Q = Quality of the audit report as perceived by users, a

dichotomous or during variable that equal 1, if the

report is reliable and O, otherwise.

CAATs = Computer assisted audit techniques.

Big4 = The four big international audit and firms which

includes; price water house cooper; Ernest and Young;

Deviote and touché; and KPMG.

IC = The strength of the internal control system

3.6 DATA ANALYSIS

The study used quantitative techniques for the analysis of dat.

Econometric view (e-view) was employed for data analysis.

Descriptive statistics, argument dickey fuller test and ordinary

least square were used. However, the model was tested using the

diagnostic tests of heterokedasiticity, serial correlation,

normality and misspecification Gujarati and porter, (2009)

52
Asterioud and hall, (2007). Augmented dickey-fuller was also used

in the study for stationary of data.

53
 CHAPTER FOUR

DATA PRESENTATION AND DATA ANALYSIS

4.1 INTRODUCTION

This chapter is specifically designed to deal with the

presentation analysis and interpretation of data collected for

this study in order to see how data collected have responded or

deviated from the study.

The data are grouped and analyzed according to research

question.

4.2 DATA PRESENTATION

TABLE 1: NAMES OF ACCOUNTING FIRMS IN PORT

HARCOURT

1. Akintola Williams Deliotte & Touche

2. Allwell-Brown & Co.
3. Ayo Akinyelure & Co.
4. Amadi Johnson & Co.
5. Aruna Bawa & Co.

54
 6. Bari Bari
7. Babatunde Ibitoye & Co.
8. Ben Omomia & Co.
9. Innocent Anyahuru & Co.
10. Ofo Odo & Co.
11. PricewaterHouse Coopers
12. Ezenwa Okoro & Co.
13. Ernest & Young Osindero Oni
14. Eyewumi, Rone & Co.
15. Ezekiel Udoh & Co.
16. Dele Dina & Co.
17. David Oleneme & Co.
18. G.A. Arueyingho & Co.
19. Maaji & Co.
20.Nnamdi Okwuadigbo & Co.
21. Sak Ladipo & Co.
22.Seyi John Agbeye & Co.

4.2 DATA ANALYSIS

RESEARCH QUESTION 1:

To what extent do auditors’ usage of computer assisted audit

tools and techniques in performance expectations in Nigeria?

55
Table 2: Computer assisted audit techniques (CAATs) and

performance expectation.

Option Response Percentage of

respond
Strongly agree 70 35
Agree 53 26
Neutral 31 15
Disagree 28 14
Strongly disagree 30 10
Total 202 100

Table 2: above shows the application of computer assisted audit

tools and techniques on the performance expectations of

auditors. Seventy respondents representing (35%) strongly agree

that computer assisted audit tools and techniques affects the

performance of auditors; 53 respondents representing (26%)

agree that computer assisted audit tools and techniques affects

the performance of auditors; 31 respondents representing

(15%) were neutral on the effect of computer assisted audit tools

and techniques and performance expectations of auditors; and 28

56
respondents (14%) disagree that computer assisted audit tools

and techniques affects performance of auditors and 20

respondents representing (10%) strongly disagree on the

effect of computer assisted audit tools and techniques on

performance expectations of auditors.

RESEARCH QUESTION 2:

To what extent do auditors’ usage of computer assisted audit

tools and techniques in effort expectancy in Nigeria?

Table 3: computer assisted audit tools and techniques and

effort expectancy:

Option Response Percentage of

respond
Strongly agree 60 30
Agree 72 36
Neutral 19 9
Disagree 31 15
Strongly disagree 20 10
Total 202 100

57
Table 3: Above shows the application of computer assisted audit

tools and techniques on the effort expectancy of auditors. Sixty

respondents representing (30%) strongly agree that computer

assisted audit tools and techniques affects the effort

expectancy of auditors; 72 respondents representing (36%) agree

that computer assisted audit tools and techniques affects the

effort expectancy of auditors; 19 respondents representing (9%)

were neutral on the effect of computer assisted audit tools and

techniques and effort expectancy of auditors; and 31

respondents (15%) disagree that computer assisted audit tools

and techniques affects effort expectancy of auditors and 20

respondents representing (10%) strongly disagree on the effect

of computer assisted audit tools and techniques on effort

expectancy of auditors.

58
RESEARCH QUESTION 3:

To what extent do auditors’ usage of computer assisted audit

tools and techniques in facilitating conditions in Nigeria?

Table 4: computer assisted audit technique and facilitating

conductions:

Option Response Percentage of

respond
Strongly agree 61 30
Agree 67 33
Neutral 35 17
Disagree 28 14
Strongly disagree 11 6
Total 202 100

Table 4 above shows the application of computer assisted audit

tools and techniques on the facilitating conditions of auditor.

Sixty one respondents representing (30%) strongly agree that

computer assisted audit tools and techniques affects facilitating

conditions of auditors; 67 respondents representing (33%) agree

59
that computer assisted audit tools and techniques affects

facilitating conditions of auditors; 35 respondents representing

(17%) were neutral on the effect of computer assisted audit tools

and techniques and facilitating conditions of auditors; and 28

respondents (14%) disagree that computer assisted audit tools

and techniques affects facilitating conditions of auditors and 11

respondents representing (6%) strongly disagree on that

facilitating conditions of computer assisted audit tools and

techniques affects the facilitating conditions of auditors.

RESEARCH QUESTION 4:

To what extent do auditors’ usage of computer assisted audit

tools and techniques in social influence in Nigeria?

60
Table 5: computer assisted audit technique and social

conductions:

Option Response Percentage of

respond
Strongly agree 50 25
Agree 63 31
Neutral 41 20
Disagree 38 19
Strongly disagree 10 5
Total 202 100

Table 5 above shows the application of computer assisted audit

tools and techniques on the social conditions of auditors. Fifty

respondents representing (25%) strongly agree that computer

assisted audit tools and techniques affects the social conditions

of auditors; 63 respondents representing (31%) agree that

computer assisted audit tools and techniques affects the social

conditions of auditors; forty one 41 respondents representing

(20%) were neutral on the effect of computer assisted audit

tools and techniques and social conditions of auditors; and 38

61
 respondents representing (19%) disagree that computer assisted

audit tools and techniques affects social conditions of auditors

and 10 respondents representing (5%) strongly disagree on the

effect of computer assisted audit tools and techniques on the

social conditions of auditors.

4.3 HYPOTHESIS TESTING

TABLE 6: BREUSCH-GODFREY SERIAL CORRELATION LM TEST

F- statistic 6.929189 Probability 0.121336

Obs R-squared 13.34731 Probability 0.101264
E-view output

Table 6 shows the BreuschGodfrey Serial Correlation LM test for

the presence of auto correlation. The result reveals that the

probability values of 0.12 (12%) and 0.10 (10%) is greater than

the critical value of 0.05 (5%). This implies that there is no

evidence for the presence of serial correlation.

62
Table 7: White heteroskedasticity test

F- statistic 0.942165 Probability 0.496821

Obs R-squared 9.519861 Probability 0.483577
E-view output

Table 7 shows the White Heteroskedasticity test for the

presence of heteroskedasticity. The econometric result reveals

that the probability values of 0.496 (50%) and 0.483 (48%) are

considerably in excess of 0.05 (5%). Therefore, there is no

evidence for the presence of heteroskedasticity in the model.

Table 8: Ramsey reset test

F- statistic 0.067894 Probability 0.794795

Log likelihood 0.071133 Probability 0.789695
ratio
E-view output

Table 8 above shows the Ramsey RESET test for

misspecification. The econometric result suggests that the

probability values of 0.794 (79%) and 0.789 (79%) are in excess

of the critical value of 0.05 (5%). Therefore, it can be seen that

there is no apparent nonlinearity in the regression equation and so

63
it would be concluded that the linear model for the accounting

services is appropriate.

Table 9: Augmented dickey-fuller unit root test

Variable Coefficient ADF 1% Test for

unit root
Use of CAATT -3.816986 -3.4755 -2.8810 I (0)
Performance -3.759500 -3.4755 -2.8810 I (0)
expectancy
Effort -4.792773 -3.4755 -2.8810 I (0)
expectancy
Facilitating -3.105035 -3.4755 -2.8810 I (0)
conditions
Social -4.355909 -3.4755 -2.8810 I (0)
influence
E-view output

Table 9 shows the Augmented Dickey-Fuller unit root test for

stationary of the variables. The result suggests that use of

CAATTs, performance expectancy, effort expectancy,

facilitating conditions and social influence with ADF of

-3.816986, -3.759500, -4.792773, -3.105035 and -4.355909 is

less than 1% of -3.4755 and 5% of -2.8810. The result reveals

that the variables are stationary at I (0). Therefore, ordinary

64
least square can be applied in the analysis of data when data is

stationary at I (0) (Greene, 2002; Wooldridge, 2006; Asterious

and Hall, 2007; Brooks, 2008; Gujarati and Porter, 2009; Kozhan,

2010).

Table 10: Multiple regression output

Variable Coefficient S.E t. Probability
statistic
C 6.291738 1.533195 4.103677 0.000100
Performance 0.182626 0.081095 2.251998 0.025400
expectancy
Effort 0.316890 0.074394 4.259630 0.003000
expectancy
Facilitating 0.279363 0.123197 2.267612 0.041300
conditions
Social 0.258639 0.099398 2.60205 0.022700
influence
R-squared 0.174889 Mean 12.633660
dependent
variable
Adjusted R- 0.158136 S.D. 2.855466
squared dependent
variable
S.E of 2.619980 Akalke into. 4.788652
regression Criterion
Sum squared 1352.267 Schwarz 4.870540
residual criterion
Log likelihood -478.6538 F. statistic 10.438960
Durbih- 1.964276 Probability 0.000000
watson stat (F. statistic)

65
Dependent variable: TCU; Method: Least squares; E-view
output.

Table 10 shows the multiple regressions analysis for the use of

computer assisted audit tools and techniques by auditors in

practice. The result suggests with p-values of 0.0254 (2.5%),

0.0030 (0.3%), 0.0413 (4.1%) and 0.0227 (2.27%) is less than the

critical value of 0.05 (5%). We fail to accept the null Hypotheses

(HO), hence we accept the Alternative Hypotheses (HA) that

performance expectancy, effort expectancy, facilitating

conditions and social influence significantly affect the use of

computer assisted audit tools and techniques in audit practice by

auditors in Nigeria. Hence, we deduce that there is a positive and

significant relationship between the use of CAATTs and the

efficient and effective performance of auditors in practice. The

R2 (coefficient of determination) of 0.174889 and adjusted R2 of

0.158136 shows that the variables combined determines about 17

and 16% of CAATTs usage by professional accountants in Nigeria.

66
The F-statistics and its probability shows that the regression

equation is well formulated explaining that the relationship

between the variables combined of are statistically significant

(F-stat = 10.43896; Fpro. = 0.000000). This result is consistent

with study conducted by Janvrin et al. (2008) that performance

expectancy and facilitating conditions such as organizational and

technical infrastructure support influence the likelihood that

auditors will use computer assisted audit tools and techniques.

The result also confirms with the study of Mahzan and

Veerankutty (2011), that CAATTs have been used mostly as a

problem solving aid. Our results revealed that the desire to use

computer assisted audit tools and techniques are more likely from

the popular accounting firms who audit companies with

sophisticated accounting information and this clients with

complex accounting information motivates auditors to acquire

more knowledge and skills in computer audit to be able to satisfy

their clients.

67
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 SUMMARY

This study has been carried out on the effect of computer

assisted audit techniques (CAATs) on the performance of audit

firms in Port Harcourt.

The research work was presented in five chapters. Chapter one

contained the background of the study, statement of problem,

objective of the study, research question, significance of the

study, research hypothesis, scope of the study, limitation of the

study, and definition of terms.

Chapter two dealt with literature review and relevance

information concerning the research work.

Chapter three dealt with research methodology and describes

the instruments and method of data collection for the study.

68
 Chapter four, analysis of the response from those administered

with the questionnaires were exhaustively carried out.

Chapter five dealt with the conclusion and recommendation.

5.2 CONCLUSION

The study examined the use of computer assisted audit tools and

techniques by accounting firms in the Niger Delta of Nigeria. The

study reviewed relevant literatures that provide strong evidence

on the effectiveness and efficiency of computer assisted audit

tools and techniques and audit practice in the provision of

accounting services in the Niger Delta of Nigeria. Our research

empirically substantiated the results of prior studies of the

relationship between CAATTs and performance expectancy,

effort expectancy, facilitating conditions and social influence.

The empirical analysis provided an association between usage of

CAATTs and all the explanatory variables in the model. On the

basis of the empirical result, the study concludes that the

69
 adoption of computer assisted audit tools and techniques has

become a beneficial choice for auditors in the 21st century

complex business environment and an efficient tool to increase

the productivity as well as the audit functions (Zhao et al., 2004).

5.3 RECOMMENDATION

The auditor should welcome the current era that has to do with

the use of computer in carrying out their audit work which will

help in the accuracy of the work, speed, and quality in auditing

the financial statement and other documents of their client and

entity. The computer assisted audit techniques saves time a

increased the confidence the auditors have in the opinion.

Also it is recommended that;

1. The professional accountants should expand their knowledge

of information technology and computer accounting audit

methodology.

70
2. the syllabus of accounting programmes for professional and

tertiary institutions should be reviewed to include courses in

computer accounting information system audit

3. relevant professional accountancy bodies in Nigeria should also

include courses in computer information system audit as part

of their training programmes and professional accountants

should be made to appreciate the relevance of computer in the

21st century business environment in the provision of relevant

accounting services for the sole aim of satisfying their clients

and also audit firms need to increase their organizational and

technical support to encourage the use of CAATTs.

71
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76
 APPENDIX 1

Department of Accountancy

School of management science

Ken Saro- Wiwa’s Polytechnic, Bori.

Rivers State.

12th October 2016.

DEAR RESPONDENTS,

I am an ND II Student of Accountancy currently carrying out a

research on “the Effect of computer assisted audit techniques

(CAATs) on the performance of audit firms in Port Harcourt”.

This research is basically academic, and a part of the

requirements of the Award of National Diploma (ND), hence you

have been selected as one of the respondents.

Please, kindly give your answer to these questions. I assure you

that your information shall be treated confidentially.

Yours Faithfully,

DAPPA, IBIENE A.

77
 APPENDIX TWO

Instruction: Please thick either Yes or No in the appropriate box

1. Department/Section…………………………………………………………………………………

2. Present Position in Office:……………………………………………………………………..

3. Sex Male [ ] Female [ ]

4. Age respondent 18-24 [ ] 25-34 [ ] 35-45 [ ]

5. Academic Qualification FSLC [ ] WASSCE [ ]

ND/HND [ ] BS.c [ ] MS.c [ ] others [ ]

6. Does computer assisted audit techniques (CAATs) used to assist

an auditor in collection of audit evidence from computerized

accounting system?

Yes [ ] No [ ]

7. Does the use of CAATs affect any other aspect of the audit

process?

Yes [ ] No [ ]

8. Is there a system of supervision and control by the use of

internal audit?

Yes [ ] No [ ]

9. Does management plan the work to be carried out in making

arrangement for engagement and allocation of duties?

Yes [ ] No [ ]

10. Does computer assisted audit techniques increase productivity?

78
 Yes [ ] No [ ]

11. Is there any positive relationship between the use of CAATs and

the quality of the auditor’s report?

Yes [ ] No [ ]

12. Does computer assisted audit affects the performance of audit

firms?

Yes [ ] No [ ]

13. Is there relevant factors on information technology use by

statutory auditors?

Yes [ ] No [ ]

14. Are their auditor and accountant of any firm able to provide more

analytical results?

Yes [ ] No [ ]

15. Is there any relationship with computerized accounting system

and computer assisted audit techniques?

Yes [ ] No [ ]

16. Does the cashier issue official receipt for all monies received?

Yes [ ] No [ ]

17. Do the place of the auditor in the 21 st century with respect of

CAATs very important in modern times for the purpose achieving

short and long term objectives?

Yes [ ] No [ ]

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18. Does CAATs contribute to the development of new knowledge and

advancement of the theories in the field survey?

Yes [ ] No [ ]

19. Does CAATs improve management effectiveness by satisfying

information needs?

Yes [ ] No [ ]

20. Does the reporting and accounting usually done by the means of
financial statement?
Yes [ ] No [ ]

80