Accounting Data Analytics Exam 2 (Ch 5-9)

Which stage of the IMPACT model (introduced in chapter 1) would the use of sparklines fit? A) Track outcomes B) Communicate insights C) Address and refine results D) Perform test plan

B) Communicate insights

CAATs are automated scripts that can be used to validate data, test controls, and enable substantive testing of transaction details or account balances and generate supporting evidence for the audit. What does CAAT stand for? A) Computer-aided audit techniques B) Computer-assisted audit techniques C) Computerized audit and accounting techniques D) Computerized audit aids and tests

B) Computer-assisted audit techniques

Which type of tax analytics provide insight which might help identify items of interest, such as high tax areas or excluded transactions? A) Descriptive analytics B) Diagnostic analytics C) Predictive analytics D) Prescriptive analytics

B) Diagnostic analytics

A company has two divisions, one in the United States and the other in China. One uses Oracle and the other uses SAP for its basic accounting system. What would we call this? A) Homogeneous systems B) Heterogeneous systems C) Dual data warehouse systems D) Dual lingo accounting systems

B) Heterogeneous systems

The DuPont analysis of return on equity (ROE) includes all but the following component ratios: A) Asset turnover. B) Inventory turnover. C) Financial leverage. D) Profit margin.

B) Inventory turnover.

Which type of audit analytics might be used to find hidden patterns or variables linked to abnormal behavior? A) Prescriptive analytics B) Predictive analytics C) Diagnostic analytics D) Descriptive analytics

B) Predictive analytics

Which audit data standards ledger identifies data needed for purchase orders, goods received, invoices, payments, and adjustments to accounts? A) Order to Cash Subledger B) Procure to Pay Subledger C) Inventory Subledger D) Base Subledger

B) Procure to Pay Subledger

Which of the following is an example of an Employee Performance KPI? A) Six Sigma Level B) Salary competitiveness ratio C) First contact resolution D) Working capital ratio

B) Salary competitiveness ratio

PWC uses all but the following systems to automate its audit process? A)Halo B) Sky C) Aura D) Connect

B) Sky

________ are existing data that have been manually evaluated and assigned a class and ________ are existing data used to evaluate the model. A) Test data; Training data B) Training data; Test data C) Structured data; Unstructured data D) Unstructured data; Structured data

B) Training data; Test data

__________ is defined as the evaluation of the impact of different tax scenarios/alternatives on various outcome measures including the amount of taxable income or tax paid. A) Tax planning B) What-if scenario analysis C) Tax compliance D) Data warehouse

B) What-if scenario analysis

Tax departments interested in maintaining their own data are likely to have their own: A) tax reporting system. B) tax data mart. C) tax dashboard. D) tax analytics.

B) tax data mart.

A particular type of digital dashboard that is made up of strategic objectives, as well as KPIs, target measures, and initiatives, to help the organization reach its target measures in line with strategic goals. This is called a what?

Balanced Scorecard

What was created by Kaplan and Norton in 1996?

Balanced Scorecard

The following feature relates to what type of system? -Allow auditors to review data in a data warehouse

Both homogeneous and heterogeneous

What type of ratio measure a firm's operating efficiency? A) DuPont ratio B) Liquidity ratio C) Activity ratio D) Solvency ratio

C) Activity ratio

Unaware of data analysis tools available to the internal auditors, a store employee frequently processes cash returns without a receipt for $99, which is just below the amount requiring manager approval of $100. An analysis using which of the following would likely (and quickly) identify the employee's fraudulent behavior. A) Leading digits hypothesis B) Moore's law C) Benford's law D) Clustering

C) Benford's law

Unaware of data analysis tools available, a sales person frequently processes lunch reimbursements without a receipt for between $9.50 − $9.98, which is just below the amount requiring a receipt of $10. An analysis using which of the following would likely (and quickly) identify the salesperson's possible fraudulent behavior. A) Leading digits hypothesis B) Moore's law C) Benford's law D) Clustering

C) Benford's law

If purchase orders are monitored for unauthorized activity in real time while month-end adjusting entries are evaluated once a month, those transactions monitored in real time would be an example of a: A) Traditional audit. B) Periodic test of internal controls. C) Continuous audit. D) Continuous monitoring.

C) Continuous audit.

According to the textbook, an example of a tax cost KPI would be: A) employee turnover of the tax personnel. B) levels of technology/tax training. C) ETR (effective tax rate). D) levels of late filing or error penalties.

C) ETR (effective tax rate).

Waste reduction rate is which of the following types of KPI? A) Employee performance B) Operational C) Environmental and social sustainability D) Financial performance

C) Environmental and social sustainability

What describes finding correspondences between at least two types of text or entries that may not match perfectly? A) Incomplete linkages B) Algorithmic matching C) Fuzzy matching D) Incomplete matching

C) Fuzzy matching

Who is most likely to have a working knowledge of the various ERP systems that are in use in the company? A) Chief executive officer B) External auditor C) Internal auditor D) IT staff

C) Internal auditor

Which audit data standards ledger defines product master data, location data, inventory on hand data, and inventory movement? A) Order to Cash Subledger B) Procure to Pay Subledger C) Inventory Subledger D) Base Subledger

C) Inventory Subledger

Which testing approach would be useful in assessing the value of inventory shrinkage given multiple environmental factors? A) Probability B) Sentiment analysis C) Regression D) Applied statistics

C) Regression

Under the guidance of the chief audit executive (CAE) or another manager, these individuals build teams to develop and implement analytical techniques to aid all of the following audits except: A) Process efficiency and effectiveness. B) Governance, risk, and compliance, including internal controls effectiveness. C) Tax compliance. D) Support for the financial statement audit.

C) Tax compliance.

The amount of time spent on compliance versus strategic activities would be an example of which kind of KPI? A) Tax cost B) Tax risk C) Tax efficiency and effectiveness D) Tax sustainability

C) Tax efficiency and effectiveness

What is the term used to describe the process of assigning XBRL tags internally within a financial reporting/enterprise system? A) XBRL tagging B) XBRL taxonomy C) XBRL-GL D) XBRL dictionary

C) XBRL-GL

The balanced scorecard is comprised of four components; which of the following is not an item that should be identified for each component? A) objectives B) measures C) destinations D) initiatives

C) destinations

The determinants for sample size include all of the following except: A) confidence level. B) tolerable misstatement. C) potential risk of account. D) estimated misstatement.

C) potential risk of account.

Monetary unit sampling is more likely to: A) sample accounts with smaller balances. B) sample accounts with less risk. C) sample accounts with larger balances. D) sample accounts with more risk

C) sample accounts with larger balances.

Under the guidance of the chief audit executive (CAE) or another manager, teams can develop and implement analytical techniques to aid the following audits except: A) governance audits B) risk audits C) security audits D) forensic audits.

C) security audits

Sparklines are generally ________ and show ________ trends. A) small; similar B) large; simple C) small; simple D) large; similar

C) small; simple

Horizontal analysis can be used to calculate trends from one period to the next or over time, using what two principles

Change amount Change percent

Heterogeneous systems working:

Companies that grow through acquisition attempt to integrate the existing systems of the companies they acquire and use a series of translators to convert the output of those systems into usable financial information

The three determinants for sample size are:

Confidence level, tolerable misstatement, estimated misstatement

The following features relate to what type of audit? -Full population testing -Alarms when a control is violated -Immediate resolution of the issue

Continuous Audit

Continuous auditing involves the application of rules or analytics that perform a ___________ function, and also generates _________ on the status of the system so that an auditor can know at any given time whether the system is operating within the parameters set by management or not.

Continuous monitoring; continuous reporting

What is considered an essential component of planning an audit and carrying out substantive testing that involves ratio analysis? A) Environmental analysis B) Competitive analysis C) Management integrity analysis D) Analytical procedures

D) Analytical procedures

Pick the FOUR patterns that could be found using Diagnostic Analysis: A) A predicted fraudulent transaction B) The bias of an annual report C) The amount of inventory shrinkage D) Employees creating fictitious vendors E) Employees structuring payments to get around approval limits F) Missing transactions G) Duplicate transactions

D) Employees creating fictitious vendors E) Employees structuring payments to get around approval limits F) Missing transactions G) Duplicate transactions

All of the following may serve as standards for the audit methodology except: A) PCAOB's auditing standards B) COSO's ERM framework C) ISACA's COBIT framework D) FASB's accounting standards

D) FASB's accounting standards

When there is an alarm in a continuous audit, but it is associated with a normal event, we would call that a: A) False negative. B) True negative. C) True positive. D) False positive.

D) False positive.

When working with CAATs, which of the following statements is false? A) Inner join will show only the records from both tables that match and exclude everything that doesn't match. B) Left join will show all records from the first table and only records from the second table that match. C) Right join will show all records from the second table and records from the first table that match. D) Outer join will show all records, including only matching ones.

D) Outer join will show all records, including only matching ones.

What type of ratio measure a firm's ability to pay its debts and stay in business? A) DuPont ratio B) Liquidity ratio C) Activity ratio D) Solvency ratio

D) Solvency ratio

What is the name of the output from data vendors to help compare companies using different XBRL tags for revenue? A) XBRL taxonomy B) Data assimilation C) Consonant tagging D) Standardized metrics

D) Standardized metrics

All of the following are included in a company's data warehouse except: A) Enterprise data B) Reporting data C) Tax tables D) Tax KPIs

D) Tax KPIs

__________ is defined as predictive analysis of potential tax liability and the formulation of a plan to reduce the amount of taxes paid. A) Tax data analytics B) Tax data warehouses C) Tax compliance data D) Tax planning

D) Tax planning

Which term defines and describes each XBRL financial element? A) Data dictionary B) Descriptive statistics C) XBRL-GL D) Taxonomy

D) Taxonomy

_______ ensures that all of its divisions and subsidiaries use a uniform installation of one ERP system. _______ allows for the use of bolt on systems of companies that are acquired and uses a series of translators to convert the output of various systems into usable financial information. A) Continuous reporting; Continuous monitoring B) Continuous monitoring; Continuous reporting C) The heterogeneous systems approach; The homogenous systems approach D) The homogenous systems approach; The heterogeneous systems approach

D) The homogenous systems approach; The heterogeneous systems approach

Accounts receivable turnover ratio is an example of which type of ratio? A) solvency ratio B) profitability ratio C) liquidity ratio D) activity ratio

D) activity ratio

According to the textbook, an example of a tax efficiency and effective KPI would be: A) number of audits closed. B) ETR (effective tax rate) over time. C) number of resubmitted tax returns due to errors. D) amount of time spent on compliance versus strategic activities.

D) amount of time spent on compliance versus strategic activities.

CAATs are: A) manual procedures B) infrequently used in audit practice C) computer algorithmic audit techniques D) automated scripts that re-perform calculations

D) automated scripts that re-perform calculations

According to the textbook, an example of a tax risk KPI would be: A) employee turnover of the tax personnel. B) levels of technology/tax training. C) ETR (effective tax rate). D) levels of late filing or error penalties.

D) levels of late filing or error penalties.

The most frequent negative words in a financial dictionary include all but which word? A) litigation B) restructuring C) impairment D) liability

D) liability

According to the textbook, an example of a tax sustainability KPI would be: A) frequency of concerns pertaining to the organization's tax position. B) level of job satisfaction of the tax personnel. C) levels of technology/tax training. D) number of audits closed and significance of assessment over time.

D) number of audits closed and significance of assessment over time.

XBRL taxonomy

Defines and describes each key data element (like cash or accounts payable). The taxonomy also defines the relationships between each element (like inventory is a component of current assets and current assets is a component of total assets).

Most auditors will perform ______________ & _________________ analytics as part of audit plan on rare occasions, they may experiment with _____________ & ____________ analytics directly.

Descriptive and Diagnostic Predictive and Prescriptive

Benford's Law is a _________ analytic, and states that:

Diagnostic; when you have a large set of naturally occurring numbers, the leading digit(s) are more likely to be small

An interactive report showing the most important metrics to help users understand how a company or an organization is performing. Often created using Excel or Tableau. This is called a what?

Digital dashboard

Methodology does what?

Directs the audit work

The most modern Data Analytics software allows auditors to drilldown into specific values by:

Double-clicking a value. This lets you see the underlying transactions that gave you the summary amount

What type of KPIs would these be considered? 1. Revenue per employee 2. Human Capital Value Added (HCVA) 3. Employee Satisfaction Index 4. Staff Advocacy Score 5. Employee Engagement Level

Employee Performance KPIs

Homogeneous systems benefits:

Enable management to consolidate all the information from various locations and roll them up management reports, audit support, and financial statements

Sentiment Analysis in auditing:

Evaluate text (10-K or annual report) for positive or negative sentiment to predict positive or negative outcomes or to look for potential bias on management's part

What-if scenario analysis

Evaluation of the impact of different tax scenarios/alternatives on various outcome measures including the amount of taxable income or tax paid

what-if scenario analysis

Evaluation of the impact of different tax scenarios/alternatives on various outcome measures including the amount of taxable income or tax paid.

P-value > alpha:

Fail to reject the null hypothesis (not significant)

A sales order ID is a unique identifier for each purchase order. True or False?

False

Audit Data Standards (ADS) were developed by the SEC. True or False?

False

Both nominal and ordinal data can also be referred to as data-driven. True or False?

False

Discrete data is data that can be represented by any number, including whole numbers and fractions. True or False?

False

Employee Performance KPIs include staff advocacy score and overall equipment effectiveness. T or F?

False

Once an auditor has a basic understanding of the data, diagnostic analytics are performed to look for differences or patterns of interest in the data. True or False?

False

Once numbers are input into a financial system using XBRL-GL, they are already tagged and able to be transmitted on the next day of business to interested users. True or False?

False

The Audit Data Standards define common tables and fields that are needed by auditors to perform common audit tasks. The Securities and Exchange Commission, or SEC, developed these standards. True or False?

False

The Base Standard of the AICPA Audit Data Standards defines the order for files and fields as well as some master data for users and business units. True or False?

False

The XBRL taxonomy helps define and describe each key data element (such as cash or employee spending). T or F?

False

The use of tags allows data to be slowly transmitted and received and serve as an input into financial analysts valuing a company, or an auditor finding areas where an error might occur, or regulators seeing if firms are in compliance with various regulations and laws (like SEC or IRS). True or False?

False

XBRL is a global standard for internet communication mostly among day traders. T or F?

False

Descriptive Analytics Diagnostic Analytics Predictive Analytics In financial statement analytics:

Financial ratios and vertical analysis Compare those to benchmarks from prior periods or competitors Includes horizontal trend analysis

What join will show all records, including matching and nonmatching ones?

Full Outer Join

A way to visualize financial data such as the relative size of accounts is to use

Heat maps and charts

The following features relate to which type of system? -Requires system translator software -Integrate multiple ERP systems in multiple locations -Usually the result of many acquisitions

Heterogeneous

heterogeneous systems approach

Heterogeneous systems represent multiple installations or instances of a system. It would be considered the opposite of a homogeneous system.

The following features related to which type of system? -Have the same ERP system in multiple locations -Simplifies the reporting and auditing process

Homogeneous

homogeneous systems approach

Homogeneous systems represent one single installation or instance of a system. It would be considered the opposite of a heterogeneous system.

Extent indicates:

How much auditors can test. Prevalence of data has expanded the extent of audit testing

Timing tells us:

How often the procedure should be run. Automation allows auditors to run analytics on a schedule and receive real-time alerts when exceptions occur

Many analyses can be performed using Excel, but most CAATs are built on generalized audit software (GAS), such as

IDEA, ACL, or TeamMate Analytics

The IMPACT Cycle stands for:

IDENTIFY the questions MASTER the data PERFORM test plan ADDRESS and refine results COMMUNICATE insights TRACK outcomes

IMPACT cycle:

Identify the questions Master the data Perform the test plan Address and refine results Communicate insights Track outcomes

The automation of the procedure involves:

Identifying the timing or schedule of how often the procedure should run, any parameters that might change, and what should happen if a new observation appears as an outlier

__________ should be the actions that an organization can take to move its specified metrics in the direction of their stated target goal

Initiatives

What join will show only the records from both tables that match and exclude everything that doesn't match?

Inner Join

A particular type of performance metric that an organization deems the most important and influential on decision making is a:

Key Performance Indicator (KPI)

What join will show all records from the first table and only records from the second table that match?

Left Join

The following are what type of ratio? Current ratio Quick (Acid test) Ratio Working Capital

Liquidity

Four main types of ratios:

Liquidity, activity, solvency (financing), and profitability

Predictive analytics in short:

Look for common attributes of problematic data to help identify similar events in the future

What type of KPIs would these be considered? 1. Conversion Rate 2. Cost per Lead 3. Page Views and Bounce Rate 4. Brand Equity 5. Customer Online Engagement Level

Marketing Performance KPIs

The ETL Process is in which IMPACT Group?

Master the data

___________ are the KPIs that show how well the organization is doing at meeting its objective

Measures

An audit plan consists of one or more of the following elements:

Methodology Scope of the audit Potential risk Procedures and specific tasks Formal evaluation

standardized metrics are:

Metrics used by data vendors to allow easier comparison of company reported XBRL data.

What do you need to specify about audit procedures?

NET: Nature, extent, timing

ROE Formula

Net Income/Shareholder's Equity

________ should be aligned with strategic goals of the organization

Objectives

For each of the four components, what is identified?

Objectives, measures, targets, and initiatives

Main impact of automation and Data analytics on the accounting profession comes through:

Optimization of the management dashboard and audit plan

What join will show all nonmatching records?

Outer Join

Any calculation measuring how an organization is performing, particularly when that measure is compared to a baseline is a what?

Performance metric

Regression allows an auditor to:

Predict a specific dependent value based on independent variable inputs

Tax Planning

Predictive analysis of potential tax liability and the formulation of a plan to reduce the amount of taxes paid

tax planning is:

Predictive analysis of potential tax liability and the formulation of a plan to reduce the amount of taxes paid.

Diagnostic Analytics

Procedures that explore the current data to determine why something has happened the way it has, typically comparing the data to a benchmark. As an example, these allow users to drill-down in the data and see how it compares to a budget, a competitor, or trend.

Diagnostic Analytics:

Procedures that explore the current data to determine why something has happened the way it has, typically comparing the data to a benchmark. As an example, these allow users to drill-down in the data and see how it compares to a budget, a competitor, or trend.

Prescriptive Analytics

Procedures that model data to enable recommendations for what should be done in the future. These typically include developing more advanced machine learning and artificial intelligence models to recommend a course of action based on a current problem.

Prescriptive Analytics:

Procedures that model data to enable recommendations for what should be done in the future. These typically include developing more advanced machine learning and artificial intelligence models to recommend a course of action based on a current problem.

Descriptive analytics:

Procedures that summarize existing data to determine what has happened in the past. Some examples include summary statistics (e.g. Count, Min, Max, Average, Median), distributions, and proportions.

Predictive Analytics:

Procedures used to generate a model that can be used to determine what is likely to happen in the future.

Predictive Analytics:

Procedures used to generate a model that can be used to determine what is likely to happen in the future. Examples include regression analysis, forecasting, classification, and other predictive modeling.

Fuzzy Matching:

Process that finds matches that may be less than 100 percent matching by finding correspondences between portions of the text or other entries.

production or live systems

Production (or live systems) are those active systems that collect and report and are directly affected by current transactions.

The following ratios are what kind of ratio? Profit margin on sales ratio Return on assets ratio Return on Equity ratio Asset turnover ratio Equity multiplier ratio

Profitability ratios

Prescriptive Analytics in short

Provide decision support to auditors as they work to resolve issues with the processes and controls

Profitability ratios are used to:

Provide information on the profitability of a company and its prospects for the future

IRS's Discriminant function:

Pulls historical data for average amount and type of deductions related to income level and predicts the likelihood of underreported income

Predictive CAATs:

Regression, Classification, Probability, sentiment analysis

P-value <= alpha

Reject the null hypothesis (significant result)

Dupont ratio:

Return on Equity = Profit margin x asset turnover x equity multiplier

What join will show all records from the second table and records from the first table that match?

Right Join

Every SQL Select Query must have two key SQL clauses:

SELECT and FROM

Low Risk/High Risk Classification in auditing:

Signify fraud as high risk and non fraud as low risk; the model will then draw connections between characteristics from each and predict new audits as high risk or low risk

Cockpits are:

Similar to dashboards but are much narrower in scope and focus than a dashboard

The following ratios are what type of ratios? Debt-to-Equity Ratio Times interest earned ratio

Solvency ratios

Descriptive analytics are useful for: Descriptive analytics enable auditors to set:

Sorting and summarizing data to create a baseline for more advanced analytics; a baseline or point of reference for their evaluation

XBRL-GL

Stands for XBRL-General Ledger; relates to the ability of enterprise system to tag financial elements within the firm's financial reporting system.

Descriptive analytics in short:

Summarize and gain insights into the data

systems translator software

Systems translator software maps the various tables and fields from varied ERP systems into a consistent format.

These are what Tax KPI category? -Effective Tax Rate -Deferred Taxes

Tax Cost

These are what Tax KPI category? -Level of Job satisfaction for tax personnel -Levels of technology/tax training

Tax Efficiency and Effectiveness

These are what Tax KPI category? -Levels of late filings or error penalties and fines -Number of resubmitted tax returns due to errors

Tax Risk

The following are what type of KPIs? -Effective Tax Rate -Cash Taxes Paid -Effect of Loss Carryforwards -Expiration of tax credits -Tax adjustments in response to new tax legislation -Deferred Taxes

Tax cost KPIs

The following are examples of what type of KPI? -Levels of technology/tax training -Amount of time spent on compliance versus strategic activities -Level of job satisfaction of the tax personnel -Employee turnover of the tax personnel -Improved operational efficiency

Tax efficiency and effectiveness KPIs

2018 Tax Cuts and Jobs Act Tax Reform

Tax legislation offering a major change to the existing tax code.

The following KPIs are examples of what type of KPI? -Frequency and magnitude of tax audit adjustments -Frequency of concerns pertaining to the organization's tax position -Levels of late filing or error penalties and fines -Number of resubmitted tax returns due to errors

Tax risk KPIs

These are what Tax KPI category? -# of company tax audits closed and significance of assessment over time -Effective Tax Rate over time

Tax sustainability

The following KPIs are examples of what type of KPI? -Number of company tax audits closed and significance of assessments over time -Effective tax rate (ETR) over time

Tax sustainability KPIs

Liquidity is:

The ability to satisfy the company's short-term obligations using assets that can be most readily converted into cash

audit data standards (ADS) definition

The audit data standards define common tables and fields that are needed by auditors to perform common audit tasks. The AICPA developed these standards.

Who is responsible for providing guidance and standardization so that different auditors and audit teams produce clear results?

The audit firm or chief audit executive

Tax risk is:

The financial and reputational risk of the misreporting of tax provision adjustments

Working papers provide the documentation for:

The procedures auditors follow, evidence they collect, and communication with the audit client

An exception report typically identifies:

The record and the date of the exception

All four of the Balanced Scorecard components should be directly related to:

The strategic objectives of an organization (Vision and strategy)

By tagging financial elements in a computer readable manner, XBRL facilitates:

The timely and accurate transmission of financial reporting to all interested stakeholders

Auditors face information overload when:

There are too many incorrect alarms that distract them from adequately evaluating the system

Scope of the audit defines what?

Time period, level of materiality, accounts and subsidiaries being audited, expected completion time for the audit

The following features relate to what type of audit? -Sampling -Auditors appear at regular intervals -Delayed resolution of the issue -Copying and pasting data into Excel -Annual Audit

Traditional Audit

What are the six categories of suggested KPIs?

!. Financial Performance 2. Operational 3. Customer KPIs 4. Employee Performance KPIs 5. Marketing KPIs 6. Environmental and Social Sustainability KPIs

Current Set of Audit Data Standards:

-Base -General Ledger -Order to Cash Subledger -Procure to Pay Subledger -Inventory Subledger -Fixed Asset Subledger

Examples of audit plan automation:

-Evaluation of audit data may be distilled into a risk score -Audit procedures themselves identify data, locations, and attributes that the auditors will evaluate -Data analytics can be applied to a client's data during the planning stage to identify which areas the auditor should focus on -The scope of the audit defines parameters that will be used to filter the records or transactions being evaluated

Audit Data Standards Goal:

-Reduce data loading and transformation effort required by the auditor, so they can focus on analytics more quickly -Define real-time or continuous analytics via the data warehouse

As they relate to Data Analytics, working papers should contain:

-Work programs used to document the audit procedures to collect, manipulate, model, and evaluate data. -IT-related documentation, including flowchart and process maps that provide system understanding -Database maps (such as UML diagrams) and data dictionaries that define the location and types of data auditors will analyze. -Documentation about existing automated controls, including parameters and variables used for analysis. -Evidence, including data extracts, transformed data, and model output, that provides support for the functioning controls and management assertions.

A z-score of 1 suggests that an observation is: A z-score of -2 suggests that an observation is:

1 standard deviation above its mean 2 standard deviations below its mean

ETL Process involves:

1. Determining the purpose and scope of the data request. 2. Obtaining the data. 3. Validating the data for completeness and integrity. 4. Cleaning the data. 5. Loading the data for analysis

GAS software has two main advantages over traditional spreadsheet software:

1. Enables analysis of very large datasets 2. Automates several common analytics, so an auditor can click a few buttons to get to results rather than writing a complex set of formulas

Once the measures have been determined, the data that are necessary to showcase those measures need to be identified. What two questions should be considered when obtaining data and evaluating their quality?

1. How often do the data get updated in the system? 2. How often do you need to see updated data?

questions to consider regarding data quality:

1. How often does the data get updated in the system? 2. How often do you need to see updated data?

Automating the audit plan & incorporating data analytics involve the following steps- similar to the IMPACT model, what are they?

1. Identify the questions or requirements in the existing audit plan 2. Master the data by identifying attributes and elements that are automatable 3. Perform the test plan by developing analytics for those attributes identified in step 2 4. Address and refine results 5. Communicate insight by testing the rules and comparing the output of the analytics to manual audit procedures 6. Track outcomes by following up on alarms and refining the models as needed

Three main sources of information for the IRS to gather data about each taxpayer:

1. Reportable financial transactions during the year and a repository of tax returns from prior years stored in a data warehouse 2. Personal data mined and monitored from social media 3. Personal financial data about each taxpayer including Soc Sec numbers, bank accounts, property holdings, and credit report

Potential types of appropriate questions for the tax function in terms of data analytics:

1. What can tax analytics do to reduce the overall current and future tax liability for an individual or for a company? 2. How might tax analytics reduce the cost of compliance and tax planning by companies? 3. If certain tax legislation passes, what level of exposure (additional tax) might the company face?

Some questions that would be helpful in determining how the dashboard could be refined are the following:

1. Which metric are you using most frequently to help you make decisions? 2. Are you downloading the data to do any additional analysis after working with the dashboard, and if so, can the dashboard be improved to save those extra steps? 3. Are there any metrics that you do not use? If so, why aren't they helpful? 4. Are there any metrics that should be available on the dashboard to help you with decision making?

Old accounts that haven't been resolved could mean:

1. the data are bad 2. a process is broken 3. there's a reason someone is holding the account open 4. it was simply never resolved

XBRL taxonomy provides tags for:

19,000 financial elements and allows for the use of company-defined tags when the normal XBRL tags are not suitable

A point with a z-score of 2.5 means the point is:

2 and a half standard deviations above the mean

Activity ratios are:

A computation of a firm's operating efficiency

data warehouse

A data warehouse is a repository of data accumulated from internal and external data sources, including financial data, to help management decision making.

flat file

A means of storing data in one place, such as in an Excel spreadsheet, as opposed to storing the data in multiple tables, such as in a relational database.

An index is:

A metric that shows how much any given subsequent year has changed relative to the base year.

continuous monitoring

A process that constantly evaluates internal controls and transactions and is the chief responsibility of management.

continuous reporting

A process that provides real-time access to the system status and accounting information.

continuous auditing

A process that provides real-time assurance over business processes and systems.

Data Warehouse

A repository of data accumulated from internal and external sources, including financial data, to help management decision making

A sparkline is:

A small visual trendline or bar chart that efficiently summarizes numbers or statistics in a single spreadsheet cell.

Tax Data Mart

A subset of a company-owned data warehouse focused on the specific needs of the tax department

tax data mart:

A subset of a company-owned data warehouse focused on the specific needs of the tax department.

Data mart

A subset of the data warehouse focused on a specific function or department to assist and support its needed data requirements

data mart:

A subset of the data warehouse focused on a specific function or department to assist and support its needed data requirements.

Ratio Analysis is:

A tool that attempts to evaluate relationships among different financial statement items to help understand a company's financial and operating performance.

common data model

A tool used to map existing database tables and fields from various systems to a standardized set of tables and fields for use with analytics.

common size financial statement

A type of financial statement that contains only basic accounts that are common across companies.

What would be the sampling interval if we are using a manual approach to monetary unit sampling for a book value of $2,000,000 and a sample size of 200? A) 10,000 B) 100,000 C) 1,000 D) Cannot be determined

A) 10,000

Which of the following defines the time period, the level of materiality, and the expected time for an audit? A) Audit scope B) Potential risk C) Methodology D) Procedures and specific tasks

A) Audit scope

Which of the following is an example of predictive analytics? A) Classification B) Z-score C) Decision support systems D) Diagnostic

A) Classification

Which testing approach would be used to predict whether certain cases should be evaluated as having fraud or no fraud? A) Classification B) Probability C) Sentiment analysis D) Artificial intelligence

A) Classification

In a certain company, one accountant records most of the adjusting journal entries at the end of the month. What type of analysis could be used to identify that this happens and the cumulative size of the transactions that the one accountant records? Select all choices that apply: A) Drill down B) Z-score C) Stratification D) Regression E) Classification F) Sequence Check G) Benford's Law H) Fuzzy Matching I) Probability

A) Drill down B) Z-score C) Stratification

Training return on investment is which of the following types of KPI? A) Employee performance B) Operational C) Customer D) Financial performance

A) Employee performance

XBRL stands for: A) Extensible Business Reporting Language. B) Extensive Business Reporting Language. C) XML Business Reporting Language. D) Excel Business Reporting Language.

A) Extensible Business Reporting Language.

When there is no alarm in a continuous audit, but there is an abnormal event, we would call that a: A) False negative. B) True negative. C) True positive. D) False positive

A) False negative.

Continuous auditing relies heavily on alarms, which are essentially notifications of a classification problem. A _______ occurs when too many alarms are false positives. A) Flood of alarms B) Exception report C) A negative event D) Data warehouse

A) Flood of alarms

What type of analysis would help auditors find missing checks? A) Sequence check B) Benford's law analysis C) Fuzzy matching D) Decision support systems

A) Sequence check

Effect of loss carry-forwards would be an example of which kind of KPI? A) Tax cost B) Tax risk C) Tax efficiency and effectiveness D) Tax sustainability

A) Tax cost

__________ allows tax departments to view multiple years, periods, jurisdictions (state or federal or international, etc.), and differing scenarios of data, typically through use of a dashboard. A) Tax data analytics B) Tax data warehouses C) Tax compliance data D) Tax planning

A) Tax data analytics

What computerized technique would be used to perform sentiment analysis on an annual accounting report? A) Text mining B) Sentiment mining C)Textual analysis D) Decision trees

A) Text mining

Which stage of the IMPACT model would the use of tax cockpits fit? A) Track outcomes B) Master the data C) Address and refine results D) Perform test plan

A) Track outcomes

A _______ is a particular type of report that is made up of strategic objectives and metrics to help the organization reach its target measures in line with strategic goals. A) balanced scorecard B) digital dashboard C) key performance indicator D) performance metric

A) balanced scorecard

Grouping records by non-obvious similarities is referred to as __________ and is an example of _________ analytics. A) clustering; diagnostic B) clustering; predictive C) classification; diagnostic D) classification; predictive

A) clustering; diagnostic

The _______ of the audit defines parameters that will be used to filter the records or transactions being evaluated. A) scope B) methodology C) plan D) IMPACT model

A) scope

Debt-to-equity ratio is an example of which type of ratio? A) solvency ratio B) profitability ratio C) liquidity ratio D) activity ratio

A) solvency ratio

The task of tax accountants and tax departments to minimize the amount of taxes paid in the future is called: A) tax planning. B) tax compliance. C) tax minimization. D) tax reduction.

A) tax planning.

The task of tax accountants and tax departments to minimize the amount of taxes paid in the future is called: A) tax planning. B) tax compliance. C) tax minimization. D) tax sustainability.

A) tax planning.

The following are what type of ratios? Asset turnover ratio Receivable turnover ratio Average collection period ratio Inventory turnover ratio Average days in inventory ratio

Activity ratios

Descriptive CAATs:

Age Analysis, Sorting, Summary statistics, Sampling

Four types of alarms that an auditor must evaluate:

Alarm/Normal Event: False positive Alarm/Abnormal Event: True Positive No alarm/normal event: True negative No alarm/abnormal event: False Negative

horizontal analysis

An analysis that shows the change of a value from one period to the next.

vertical analysis

An analysis that shows the proportional value of accounts to a primary account, such as Revenue

An exception occurs when:

An automated or continuous auditing rule is violated

A flat file is a single table of data with user-defined attributes. True or False?

True

A fuzzy match is based on the similarity of the values. True or False?

True

A proper strategy for a company's growth considers what a firm does well and how it achieves it. T or F?

True

According to the text, the IRS mines and monitors personal data from social media (such as Facebook, Twitter, Instagram, etc.)1 about taxpayers. True or False?

True

Continuous auditing is a process that provides real-time assurance over business processes and systems. True or False?

True

Dashboards allow tax departments to evaluate those jurisdictions where current state income tax liabilities have departed most from the liability of prior years. True or False?

True

Data analytics can help predict a company's revenue, earnings, and cash flow. T or F?

True

Data analytics is the process of measuring past performance while comparing it to targeted goals to better evaluate a company's progress. T or F?

True

Financial performance KPIs include net profit, net profit margin, and gross profit margin. T or F?

True

Frequency and magnitude of tax audit adjustments are an example of tax risk KPIs. True or False?

True

KPI data is typically stored in the company's ERP or accounting information system while KPI data analysis for the digital dashboard is created in a data visualization tool such as Excel or Tableau. T or F?

True

Regression allows an auditor to predict a specific dependent value based on independent variable inputs. True or False?

True

The General Ledger Standard of the AICPA Audit Data Standards adds the chart of accounts, source listings, trial balance, and GL detail. True or False?

True

The IRS mines and monitors personal data from social media (such as Facebook, Twitter, Instagram, etc.) about taxpayers. True or False?

True

The usefulness of the what-if scenario analysis is that decision makers can see the possible impact of changes in tax rates across multiple scenarios. True or False?

True

Uniform Distribution vs Poisson Distribution:

Uniform: all outcomes are equally likely Poisson: low mean and highly skewed to the right

financial statement analysis is:

Used by investors, analysts, auditors, and other interested stakeholders to review and evaluate a company's financial statements and financial performance.

_____________ ___________ allows managers to evaluate the KPIs and how far they vary from the expected outcome

Variance analysis

Prescriptive CAATs:

What-if analysis, applied statistics, artificial intelligence

A flood of alarms occurs when?

When too many alarms are false positives

Nature represents:

Why auditors perform audit procedures; helps determine the objectives of the audit and the outputs generated by the business processes

XBRL

XBRL stands for eXtensible Business Reporting Language and is a type of XML (extensible markup language) used for organizing and defining financial elements.

Diagnostic CAATs:

Z-Score, Benford's Law, Drill-down, exact and fuzzy matching, sequence check, stratification, clustering

In Excel formulas, we identify data elements in:

[brackets]

A p-value less than alpha signifies that:

a change was detected; the default hypothesis can be rejected

What would you consider to be Marketing KPIs? a. Conversion Rate b. Six Sigma Level c. Employee Churn Rate d. Customer Engagement

a. Conversion Rate

Which items would be currently out of scope for Data Analytics? a. Direct observation of processes b. Evaluation of time stamps to evaluate workflow c. Evaluation of phantom vendors d. Duplicate payment of invoices

a. Direct observation of processes

The following are typical examples of nominal data except: a. Grade point average b. Zip codes c. Eye color d. Gender

a. Grade point average

What would you consider to be an Operational KPI? a. Inventory Shrinkage Rate b. Brand Equity c. CAPEX to Sales Ratio d. Revenue per Employee

a. Inventory Shrinkage Rate

What would you consider to be Financial Performance KPIs? a. Total Shareholder Return b. Customer Profitability Score c. Market Growth Rate d. Klout Score

a. Total Shareholder Return

Any t-stat greater than +2 or less than -2 is:

acceptable

Working papers are essential to:

audit planning, performance, and evaluation

________ is data that is represented by whole numbers. a. Continuous data b. Discrete data c. Interval data d. Ordinal data

b. Discrete data

What does KPI stand for? a. Key performance index b. Key performance indicator c. Key paired index d. Key paired indicator

b. Key performance indicator

1st place, 2nd place, and 3rd place would be best described as an example of: a. Nominal data b. Ordinal data c. Structured data d. Interval data

b. Ordinal data

What is defined as any calculation measuring how an organization is performing, particularly when that measure is compared to a baseline? a. KPI b. Performance metric c. Digital dashboard d. Balanced Scorecard

b. Performance metric

Big Data is often described by the three Vs, or: a. volume, velocity, and variability b. volume, velocity, and variety. c. volume, volatility, and variability. d. variability, velocity, and variety.

b. volume, velocity, and variety.

A sunburst diagram is a candidate for use with a

balance sheet

What is defined as an interactive report showing the most important metrics to help users understand how a company or an organization is performing? a. KPI b. Performance metric c. Digital dashboard d. Balanced Scorecard

c. Digital dashboard

Which of the following is not an example of continuous data? a. Meters swam in 25 minutes b. Miles run in 25 minutes c. Free throws made in 25 minutes d. Laps biked in 25 minutes

c. Free throws made in 25 minutes

On a Balanced Scorecard, which is not included as a component? a. Financial Performance b. Customer/Stakeholder c. Order Process d. Organizational Capacity

c. Order Process

The most important KPIs should be placed in the corner of the page even if we are not following a strategy map template. a. Bottom right b. Bottom left c. Top left d. Top right

c. Top left

The purpose of creating a digital dashboard is to:

communicate how the organization is performing so decision makers can improve their judgment and decisions

The higher the t-value, the greater

confidence we have in the coefficient as a predictor

Some continuous monitoring techniques are:

continuous auditing and continuous reporting

On a Balanced Scorecard, which is not included as a component? a. Financial Performance b. Customer/Stakeholder c. Internal Process d. Employee Capacity

d. Employee Capacity

According to the text, which of these are not helpful in refining a dashboard? a. Which metric are you using most frequently to help you make decisions? b. Are you downloading the data to do any additional analysis after working with the dashboard, and if so, can the dashboard be improved to save those extra steps? c. Are there any metrics that you do not use? If so, why aren't they helpful? d. Which data are the easiest to access or least costly to collect?

d. Which data are the easiest to access or least costly to collect?

Because dashboards tend to be monitored on a ______ or even more frequent basis, communication with all the users is imperative to ensure that the identified metrics are appropriate and useful

daily

ADS: Fixed Asset Subledger

defines fixed asset master data, additions, removal, and depreciation calculations

ADS: Inventory Subledger

defines inventory location master data, product master data, inventory on hand data, and inventory movement transactions as well as physical inventory and material cost

ADS: Procure to Pay Subledger

defines purchase orders and line items, goods received and line items, invoices received and line items, open accounts payable and adjustments, payments, and supplier master data

ADS: Order to Cash Subledger

defines sales orders and line items, shipments and line items, invoices and line items, open accounts receivable and adjustments, cash receipts, and customer master data

ADS: General Ledger

defines the chart of accounts, source listings, trial balance, and general ledger or journal entry detail

Audit Data Standards: BASE

defines the formats for files and fields as well as master data requirements for users, business units, segments, and tax tables.

Four main categories of Data Analytics:

descriptive, diagnostic, predictive, prescriptive

Managers rely on a combination of: _______ analytics to compute the results of an initiative, _________ analytics to compare those results to a benchmark (budget), __________ analytics to plan for future periods, and _______ analytics to guide the controlling process

descriptive, diagnostic, predictive, prescriptive

A z-score (standard score) is a ______ analytic, and assigns a:

diagnostic; value to a number based on how many standard deviations it stands from the mean

Drill-down could be useful in:

evaluating the individual transaction. Auditors determine whether the employee is following the appropriate process and that they are not purposefully circumventing internal controls. Exceptions represent risk, but not necessarily a problem.

The primary output of CAATs is: This is included in the:

evidence that may be used to test management assertions about the processes, controls, and data quality; audit workpapers

4 Components of the balanced scorecard:

financial customer internal process organizational capacity

Cost, expense, or liability might be viewed as negative in normal English, but not in the:

financial dictionary

The tax function typically uses data from the:

financial reporting system

Sentiment analysis could be used with:

financial statements, other financial reports, and other financially related information to gauge positive and negative meaning from otherwise text-heavy notes

Homogeneous systems allow for ________ interaction within a company and a _________ lower cost of internal controls since systems are set up and used in the same fashion.

greater; lower

Stratification and clustering are generally used for data exploration rather than substantive testing, and involves

grouping items by similar characteristics or strata

We use solvency ratios to:

help assess a company's ability to pay its debts and stay in business

Age analysis: Aging of accounts receivable

helps determine the likelihood that a balance will be paid

Altman's Z is a calculated score that:

helps predict bankruptcy and might be useful for auditors to evaluate a company's ability to continue as a going concern

Diagnostic analytics in short

identify patterns in the data that may not be immediately obvious

The creation of a Balanced Scorecard or any type of digital dashboard is:

iterative

Matching in CAAT is used to:

link records, join tables, and find potential issues

The most frequent negative words in the financial dictionary include words like:

loss, claims, impairment, adverse, restructuring, and litigation

Whereas a traditional audit may have the internal auditors perform a routine audit plan every 12 to 36 months, the continuous audit evaluates data in a form that:

matches the pulse of the business

A basic premise underlying the application of analytical procedures is that:

plausible relationships among data may reasonably be expected to exist and continue in the absence of known conditions to the contrary

Most of the effort in Data Analytics is:

preparing the analysis for the first time

Descriptive Analytics

procedures that summarize existing data to determine what has happened in the past

Sources of taxpayer information can help the IRS to establish a:

profile

Classification in auditing is going to be mainly focusing on:

risk assessment

The steps to follow to perform the analysis are part of the algorithm, and can be recorded using a _______

scripting language

The primary objective of descriptive analytics for financial statements is to:

set a benchmark to compare against a company or portfolio of interest

Stratification is useful for:

sorting the records by date patterns or specific employees to identify these patterns.

Z-score may find those employees with:

statistically rare totals.

__________ should be achievable goals toward which to move the metric

targets

Increasingly, tax regulators are using data analytics to evaluate:

tax compliance by those with potential tax liability

Documenting Book-Tax Differences is one way for:

tax regulators to assess if companies are paying sufficient tax

Tax sustainability refers to:

the ability to sustain similar tax performance over time

Tax cost is:

the actual amount of tax paid

Tax efficiency and effectiveness refers to:

the efficiency and effectiveness of technology, processes, and people in carrying out the tax function

XBRL and Data Analytics allow timely analysis of:

the financial statements and the computation of financial ratios

Sorting in ascending order shows: Sorting in descending order shows:

the smallest number values first; the largest values first.

Benford's Law can also detect random computer-generated numbers because:

those will have equally distributed first digits

In auditing, we can use Benford's law to identify:

transactions or users with nontypical activity based on the distribution of the first digits of the number