The test data technique is primarily designed to test the effectiveness of the internal control procedures which are incorporated in the client’s computer program. The objective of the test data technique is to determine whether the client’s computer programs can correctly handle valid and invalid conditions as they arise.
To accomplish this objective the auditor prepares test data (fictitious transactions) that consist of valid and invalid conditions. The auditor enters the test data into the system and have the data processed by the entity’s computer programs. Since the auditor is the one who crates the test data, the auditor knows what the output should look like assuming the client’s computer programs is functioning effectively. The auditor then compares the processing results with his predetermined output. If the output generated by the client’s program is the same as the auditor’s expected output, the auditor may conclude that the client’s program is reliable.
A disadvantage of the test data technique is that the auditor does not have an assurance that the program tested is the same program used by the client throughout the accounting process. . In order to overcome this disadvantage, the test data technique can be extended to an integrated test facility (ITF)
An integrated test facility (ITF) creates a fictitious entity in a database to process test transactions simultaneously with live input. It can be used to incorporate test transactions into a normal production run of a system. Its advantage is that periodic testing does not require separate test processes. However, careful planning is necessary, and test data must be isolated from production data. Integrated test facility is considered a useful audit tool during an IT audit because it uses the same programs to compare processing using independently calculated data. This involves setting up dummy entities on an application system and processing...