Cats have keen senses and, with the proper training, would be excellent watch animals. Cats, like dogs, are very tuned-in to their environment, and are able to detect subtle changes that humans may not be able to sense. In the wild, cats use their excellent hearing bot to fend off predators and detect prey.
Yes, cats should be used as watch animals. A cat is extremely sensitive to sound and has noticeable body language that would alert a person to events taking place in and around a home or business. It is possible to simply watch a cat and recognize that something is amiss. A cat will turn its ears to focus in the direction of an unusual sound. The cat will also react with a level of intensity equal to the unusual event it has recognized. A watch dog will alert someone to an event and even protect its owner. But, if a watch animal is needed for an alert but not protection the cat can be extremely helpful.
Cats should not be used as watch animals. Cats are too aloof acting, and have no way of warning owners about potential intruders. The furry feline cannot bark loudly like many dogs can. Several breeds of dogs can be used as effective watch animals because they can bark loudly, and some can even attack intruders.
Most cats are content to just lounge around, basking in sunshine or languishing on a couch. They are not trainable in the way that a dog is. Certainly some pet owners can train their cat to come to its own name, or to "get out of there!" or use a litter box, but in the grand scheme of actually teaching cats to do "tricks" or be truly trained in the way that a dog or a horse can be, that's not something cats are even capable of. There exists a story on the internet about a cat attacking someone that came in their house, but that's something that the cat did out of instinct, not something it was trained to do.