How Auditors Use Continuous Audit Techniques (CATs)

Updated on January 22, 2018
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Currently pursuing a professional course in Assurance. I have practical knowledge and experience in audit, systems control and accounting.

Verification of transactions
Verification of transactions

The Auditors

While everyone enjoys the last few weeks of December of every year in festive mood and joy, there is a section of people who wait both eagerly and warily for the year end. Say hello to the financial auditors. These professionals are known by different names across different countries - CPA in America, CA in UK and India and so on. These guys are the financial watchdogs of business entities and safeguard the public interest by providing assurance services. An assurance service involves the expression of an opinion by the auditor on the affairs and health of the company they audit. This is not an easy task. At every year end, an auditor is provided access to the financial information and transactions entered into by the company during the year which he then proceeds to audit and verify. Since it is not possible to verify the transactions which occur over a period of 12 months in just a few weeks, the auditors rely on samples, audit software and professional judgments.

But there are situations where an auditor cannot wait till the year end to audit financial data, discover errors and correct them. The best example of this is banking. Imagine you go to the bank to deposit funds of $5000 into your account. The bank accepts the amount of $5000 but while updating the transaction in their computer system, lets say the system has an error and records it as $4000. You might not check your monthly statements and therefore the error might go completely unnoticed. At the end of the year, the auditor might find the error when he commences audit but then what about the interest cost on $1000? Being a system error it surely wouldn't be isolated to your transaction alone. Thousands of different accounts would have been affected and the interest cost to be paid by the bank would be huge. Also more important than interest cost, the reputation and image of the bank would take a hit. Customers would lose their trust in the bank and overnight the bank would collapse. It is due to these circumstances that the continuous or concurrent audit techniques (CAT) have been developed.

The CATs

Continuous Audit Techniques are techniques used by the auditors to provide continuous assurance in real time and online basis. The CATs are the darlings of the auditor. They are instrumental in the capture of information at the transaction stage and reporting the same to the auditor on the go. Computers and internet have resulted in business entities generating information in real time. Book keepers are no longer opening their long ledger books and posting entries manually. They have been replaced by systems and software which record, process and generate output for analysis at the click of a button. Only real time audit of such information is relevant. CATs reduce the time gap between the occurrence of the transactions and the assurance services provided. This is crucial to save costs and to ensure smooth functioning of business.

CATs are completely computer based
CATs are completely computer based

Types of CATs (A few of them)


This technique involves installation of a snapshot software at critical processing points of an application or a system. The software proceeds to capture images of the transaction as it flows through the application and reports to the administrator immediately. Think of an ATM. As you make the transaction, it captures screenshots of the data you enter in the ATM and reports it to the bank authorities. This data is then analyzed and audited immediately to check for errors or irregularities.

System Control Audit Review File:

Audit software modules are inserted in the application system which provide real time monitoring and reporting functions. The advantage of this technique over snapshot is that snapshot captures every transaction blindly while system control audit review file technique only captures those transactions which have a deviation or an error.

Audit Hooks:

Auditors on many occasions come across suspicious transactions. Audit hooks are software which enable the auditors to tag these transactions. Whenever similar transactions recur, reports are immediately generated and sent to the auditors. This keeps the auditor informed and alert to any deviations and instances of fraud.


As you can see, CATs save auditors a lot of time and provide precise, relative and objective information to act on. Through the use of CATs the auditors no longer need to take data dumps, obtain samples and then test check them for any deviations or errors. So truly enough CATs are the favorite pets of auditors!

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

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