Accounting Analytics Test 2

Descriptive analytics of a return on market equity performed by researchers, __________ , provide examples of a possible anomaly right around zero that requires further analysis.

Burgstahler and Dichev

What type of analytics would include Benford's law to assess whether fraud had occurred?

Diagnostic analytics

Which cash reconciling item could potentially affect either the bank statement or the general ledger?

Error

Which ratio includes a component to evaluate financial leverage?

Return on equity

In vertical analysis, the relevant base for accounts receivable would be which of the following?

Total assets

measure how expectations given by benford's law compare to actual observed data

chi squared

o Summarizes and disaggregates company performance and can help answer the important question of what happened

dupont analysis

A _______ is a graphical depiction of a _______, which reorganizes and summarizes certain data using cross-tabulations without changing the underlying spreadsheet (or data).

pivot chart; pivottable

the mean number of events per interval of space or time (low mean and highly skewed right)

poisson distribution

If we wanted to know what level of sales would be needed to break even given the current economic environment, we would call that _______ analytics.

prescriptive

The appropriate test to see if independent variables are related to a dependent variable is called a(n) _______.

regression

Which predictive analytics technique would be used to predict the interest rate given from a lender (bank) to a borrower?

regression

Optimization is most closely associated with prescriptive analytics.

true

Standard cost is an estimated, or expected, cost of producing a good or service used in management accounting.

true

The balance in the cash account is deterministic as compared to being probabilistic.

true

To compute the percentage change in a horizontal analysis, the computation is:

(New − Old)/Old.

example of when to use a histogram

-descriptive statistics o Example - reporting return on assets performance for the retail industry during 2018

In which of the buckets would you expect the greatest amount of aged receivables to be?

1-30 days

According to Benford's law, which one of these first digits have a higher probability of occurrence than the first digit 3?

2 or 1

According to Benford's law, what is the expectation for the percentage of times that the first digit of a number is a 9?

4.58%

1 std

68% of the data points

2 std

95% of the data point

3 std

99.7% of the data points

When is Benford's law analysis not useful?

Assets only recorded above a certain threshold

What kind of analytics is generally used to predict whether a company's financial statements are fraudulent?

Classification

If we run a regression where y (college completion rate) = f (factors potentially predicting college completion rate), what is the dependent variable?

College completion rate

What tool or technique is used to quantitatively analyze the relationship between and among multiple variables?

Cross-tabulations

Which measure would help us evaluate what happens in the highest and lowest 10 percent of the data?

Deciles

According to Beneish, which of the following factors are predictive of financial statement fraud?

Decrease in depreciation expense

What type of analytics addresses questions of "What happened?"?

Descriptive analytics

What type of analytics would primarily summarize facts and compute sums, averages, counts, etc.?

Descriptive analytics

Which type of analytics generally would go first when addressing an accounting issue?

Descriptive analytics

Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. What is the expectation when the price of raw materials unexpectedly decreases below the standard price?

Favorable price variance

In vertical analysis, the relevant base for interest expense would be which of the following?

Sales revenue

Which of the following can potentially find gaps in the check numbers written?

Sequence check

Predicting future operating income would be an example of which type of predictive analytics?

Time series

What kind of analytics is generally used to forecast future sales, earnings, and cash flows from operating activities?

Time series

In vertical analysis, the relevant base for long-term debt is which of the following?

Total assets

Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. What is the expectation when the price of raw materials unexpectedly increases?

Unfavorable price variance

Which distribution is a probability distribution where all outcomes are equally likely?

Uniform distribution

Which tool is generally associated with prescriptive analytics?

What-if scenario

Which type of question does diagnostic analytics address?

Why did it happen?

Which type of question does predictive analytics address?

Will it happen in the future?

o Firm's bankruptcy risk; put companies into classes of whether they are at risk or not

altman's z

The best measure for evaluating firm efficiency in handling and using assets would be _______.

asset turnover

Classification analysis to decide on client acceptance or rejection is most important for ______.

auditors

Not considering historical averages when making predictions of possible future events is known as _______.

base rate fallacy

A type of analytics performed to find anomalies/outliers (expected distribution of the first or leading digit with there being more 1's and 2's)

benford's law higher percent for 1 and goes down from there

Used to determine whether these is a statistically significant difference between the expected frequencies and the observed frequencies in one or more categories of a table

chi squared

Predicting which companies are likely to be fraudulent/not fraudulent or likely to be bankrupt or not bankrupt are examples of _______.

classification

Predictive analytics technique to separate a sample (or population) into one or more groups or classes is called _______.

classification

Which predictive analytics technique would be used to predict whether a firm is likely to go bankrupt in the coming year?

classification

Evaluating the relationship between sales and advertising expense would be an example of the diagnostic analytics of _______.

determining relations/patterns/linkages between variables through statistical analysis

The 2011 movie Moneyball is an example of _____ analytics applied to the sport of baseball.

drill-down, detailed

If a company has an Altman Z-score of 2.8, the company would be classified in the _______.

gray zone, or at risk of bankruptcy

If the critical value for a one-tailed t-test at the α = 0.05 level is 1.645, the t-statistic needed to reject the null hypothesis of no difference would be _______.

greater than 1.645

o Understand the frequency of the data using a display of rectangles with area proportional to the underlying frequency of the data

histogram

Computing and evaluating price and quantity variances would be an example of the diagnostic analytics of _______.

identifying anomalies/outliers

The older the accounts receivable (i.e., longer amount of time it has been outstanding), the _______ likely it will be that they will ultimately be collected.

less

The best way to analyze the extreme values in the sample would be to consider the _______.

maximum or minimum

Descriptive analytic measures of variability include all except which of the following?

medians (includes STD, min, and max)

A bell shaped probability distribution that is symmetric about its mean with the data points closer to the mean more frequent than those data points further from its mean

normal distribution

what is the dupont analysis equation

o Profit margin x asset turnover x financial leverage = return on equity

A _______ t-test has more power than a _______ t-test. `

one-tailed; two-tailed

The persistence of _______ as compared to _______ is consistent with GAAP requiring the use of accrual accounting for financial reporting purposes.

operating income; cash flows from operating activities

What is an observation that lies outside its expected distribution?

outlier

Analysis of the customer that owes the most would be an example of the diagnostic analytics of _______.

performing drill-down detailed analytics

__________ is the repeatability of the financial statement variables (e.g., earnings, sales, cash flows) over time.

persistence

Predictive analytics is useful for which type of analysis?

regression analysis

If p-value < = alpha threshold, you should:

reject the null hypothesis (i.e., significant result).

A software program that automates certain repeatable tasks is called _______.

robotic process automation

The best way to analyze the variability in the sample would be to consider the _______.

standard deviation

Forecasting sales for budget purposes is an example of which type of predictive analytics?

time series

"What should we do based on what we expect will happen?" is investigated using Prescriptive Analytics.

true

A realistic expectation an accountant could hold is that addresses of the company vendors are not similar to that of the company employees.

true

Department stores have faster asset turnover than airline companies.

true

Descriptive analytics are analytics that characterize, summarize, and organize features and properties of the data to facilitate understanding.

true

We would expect a positive (+) relationship between loan acceptance and employment length.

true

The appropriate test to compare one sample to another sample to see if one is greater than another in some way is called a(n) _______.

two-sample t-test of a difference in means

all outcome equally likely

uniform distribution

Which statistic tells us how many standard deviations (σ), a data point (or observation), xi, is from its population mean, μ?

z-score

· tells us how many standard deviations a data point is from its population mean

z-score

Accounting based data that conforms with benford's law

§ EPS § Earnings § Sales § Forecasts of earnings by financial analysts § Total assets of the Fortune 500 or Russell 3000

altman's z considers more that 20 ratios but what are the 5 for the equation and thier weights

§ Working capital weight 1.2 § Retained earnings/total assets weight 1.4 § Earnings before interest and taxes/total assets weight 3.3 § Market value of stockholders equity/book value of total debt owned weight .6 § Sales/total assets weight 1

what are altman's z buckets

§ Z<1.80 · Significant risk of bankruptcy "distress zone" § Z>= 1.80 and Z<3.0 · At risk of bankruptcy the "gray zone" § Z>=3.0 · Not currently at risk of bankruptcy the "safe zone"

_______ is used to help find vendors that might have a similar address as an employee.

Fuzzy matching

According to the text, _______ prefers _______ -basis accounting since it is better at forecasting future performance.

GAAP, accrual

Which would have a higher expected asset turnover (per dollar of assets) than the others?

Grocery stores

Where would the company likely get data comparing the salaries of female executives to the salaries of male executives?

Human resources system

All of the following are factors used by Altman's Z in predicting bankruptcy except: Sales/Total assets Market value of stockholders' equity/Book value of total debt owed Retained Earnings/Total assets Income/Total assets

Income/Total assets

Which would have a higher expected profit margin (per dollar of sales) than the others?

Jewelry (luxury items/unique)

Would a greater amount of working capital/total assets lead to more bankrupt or less bankrupt firms?

Less bankrupt

In fuzzy matching, if an exact match (tolerance = 100%) is required, what is the likely consequence for finding potential matches?

Only exactly matches, no potential matches

Which is more persistent in predicting future amounts of the variable based on current amounts of that same variable?

Operating income

What is an example of a cash reconciling item for an item recorded in the general ledger but not yet recorded in the bank statement?

Outstanding checks

Diagnostic analytics is broken down into all except for which of the following broad categories? Identifying anomalies and outliers Performing drill-down detailed analytics Performing statistical analyses Performing descriptive analytics

Performing descriptive analytics

Which distribution is a probability distribution with a low mean and highly skewed to the right?

Poisson distribution

What type of analytics would address the question of whether a company will go bankrupt?

Predictive analytics

What type of analytics would primarily use what-if analysis, scenario manager, and goal seek analysis?

Prescriptive analytics

The calculation for return on equity using Dupont Analysis would be as follows:

Profit margin × Asset turnover × Financial leverage