Data Analytics
In an aging analysis, which accounts would you expect to be less collectible?
Accounts with older activity
What type of ratios measure a firm's operating efficiency?
Activity ratios
When you evaluate accounts receivable and place them in buckets based on how many days have passed since they were created, it is called:
Age analysis
Which of the following is NOT a question an auditor might ask when identifying the problem?
Am I trying to find phantom customers?
When a Z-score is used to identify anomalies, which of the following most likely represents an outlier?
An observation with a Z-score of +3.1
________ can be used to group data by less obvious similarities, such as preference determined through purchase behavior.
Clustering
Which audit data standard would most likely include the chart of accounts?
General Ledger Standard
The audit data standards include all of the following EXCEPT
General journal standard
Which internal audit department will work most directly with external auditors?
Support for the financial statement audit
_____ use data analytics to see if companies are close to paying what would be expected based on tax rates and expected income or sales.
Tax regulators
What is the name of the computerized technique would be used to perform sentiment analysis on an annual accounting report?
Text mining
Tax sustainability KPIs include which of the following?
The effective tax rate over time Number of company tax audits closed over time
Which portion of the annual report is not required to be tagged?
Top officer compensation
The recent Supreme Court Wayfair decision allows the collection of sales tax on every online purchase based on where the _______.
customer lives
True or false: The numbers in the footnotes are not required to be tagged in XBRL.
false
Drill down is used to:
find specific values that are summarized in general data
Under the sixth step (Track Outcomes) of the IMPACT model used to implement Data Analytics in the audit, auditors would:
follow up on alarms from the analytics models and refine the model as needed
Sales tax regulators ask retail (and other) companies for ______ to evaluate if their estimate of sales tax owed is close to the sales tax paid.
gross sales or net sales
Companies that have undergone multiple mergers and acquisitions are more likely to have ___________.
heterogeneous systems
For each of the four components of the balanced scorecard, _________, measures, targets, and initiatives are identified.
objectives
Manual tasks, including _________ and inspection are generally areas where Data Analytics may not apply.
observation
The name of the method that measures the proportion of negative words to total words to measure sentiment is called
overlap
Data stored in _____________ can be scanned and converted to tabular data using specialized software.
paper documents
As part of continuous auditing, continuous _________ on the status of the system so at any given time, the auditor can know if the system is operating within set parameters.
reporting
XBRL is considered to be eXtensible because it allows:
tagging to be extended for customized tags that don't fit standard definitions
A general rule for data visualization is that the most important KPIs should be placed in the ____________ corner of the dashboard.
top left
To the extent that sparklines allows users to continuous monitor the status of various outcomes, it would fit into which stage of the IMPACT model (introduced in chapter 1)?
track outcomes
_____ is designed around the idea that computers can learn about action or behavior from the past and predict the course of action for the future.
Artificial intelligence
Which of the following is a question an auditor might ask when applying Data Analytics?
Does it add value?
Extent
How much we can test
Nature
Why we perform audit procedures
When auditors use ratio analysis to identify areas of interest, it is called ______________________.
analytical procedures
Descriptive analytics enable auditors to set a _____ or point of reference for their evaluation.
baseline
Benford's Law would be an example of _________ analytics.
diagnostic
XBRL stands for:
eXtensible Business Reporting Language
Internal auditors are more likely to have working knowledge of various _________ systems like Oracle and SAP.
enterprise resource planning
A(n) __________ is reported when an automated rule is violated.
exception
When too many exceptions are actually normal transactions, auditors face
information overload
The primary goal of the audit data standards is to reduce auditors' efforts to:
load and transform the data
Regression analysis would be an example of _________ analytics.
predictive
The ______ of the audit defines the time period, level of materiality and expected time for the audit.
scope
Surveillance video or text from email are examples of _____ Big Data potentially usable by auditors.
unstructured
A segregation of duties analysis may assist auditors in finding
which accounting users had too much access to other accounting tasks
The current US GAAP Financial Reporting Taxonomy defines approximately _________ elements with descriptions.
19,000
According to experts, each component of a Balanced Scorecard should include how many KPIs for each component (Financial, Customer, Internal Process, and Organizational Capacity).
3-4
What standard was developed by the AICPA to almost effortlessly share data between the external auditors and internal accounting department to perform routine audit tasks?
Audit Data Standards
As mentioned in the text, knowledge of financial statement analysis using ratios is a component of several professional certifications, including the CPA, CFA, and the ________?
CMA (Certified Management Accountant)
Which of the following is an advantage of generalized audit software over spreadsheets?
Common analytical routines can be automated.
The acronym CAAT stands for:
Computer-assisted Audit Techniques
COBIT are standards sometimes used to frame an audit. COBIT stands for the following:
Control Objectives for Information and Related Technologies
According to the textbook, which of the following is not a department of internal audit?
Cost variances and cost minimization
______ allow tax departments to evaluate those jurisdictions where current state income tax liabilities have departed most from the liability of prior years.
Dashboards
What is an interactive report showing the most important metrics to help users understand how a company or an organization is performing?
Digital dashboard
What do you call the process of disaggregating ROE into its component ratios of profit margin, asset turnover and financial leverage?
DuPont analysis
_____, such as TeamMate or Xero, automate the workflow of evidence collection, evaluation, and opinion generation on the part of the audit teams.
Electronic workpaper platforms
Employee satisfaction metrics would be considered to be what type of KPI?
Employee
Revenue per employee metrics would be considered to be what type of KPI?
Employee
Carbon Footprint metrics would be considered to be what type of KPI?
Environmental
______ may include data extracts, transformed data, and model output used to provide support for management assertions.
Evidence
Which of the following is NOT a driver for a modern audit?
Existence of more data to audit or faster computers
A transaction that is flagged as an error or fraud but that really is not an error or fraud is an example of a:
False positive
EBITDA metrics would be considered to be what type of KPI?
Financial Performance
Total shareholder return metrics would be considered to be what type of KPI?
Financial Performance
_________________ is used by investors, analysts, and auditors to review and evaluate a company's financial statements and financial performance
Financial statement analysis
Which of the following is true regarding audit analytics:
For CAATS, a periodic validation should take place to make sure they continue to function as expected
Which of the following is an approach used by companies that use uniform ERP systems?
Homogeneous systems approach
Timing
How often the procedure should be run
In practice, auditors frequently must make multiple requests for flat files or data extractions from the
IT manager
Who are most likely to use data analytics to provide assurance for a company?
Internal auditors
The __________ subledger standard from the audit data standards covers the product master data.
Inventory
By its design, a digital dashboard would be most likely to include:
KPIs
What is defined as a particular type of performance metric that an organization deems the most important and influential on decision-making?
Key Performance Indicator
Tax risk KPIs include which of the following?
Levels of late filing or error penalties and fines Frequency of concerns regarding company tax position Frequency and magnitude of tax audit adjustments
The current ratio is an example of what type of ratios?
Liquidity
Market Growth Rate metrics would be considered to be what type of KPI?
Marketing
Becoming familiar with and using XBRL-tagged financial statements as a data source for subsequent analysis is part of which stage of the IMPACT model?
Master the data
Quality index metrics would be considered to be what type of KPI?
Operational
Which audit data standard would most likely include sales orders?
Order to Cash Subledger Standard
What is defined as any number used to measure performance at a company?
Performance metric
Which of the following best illustrates the use of regression in auditing.
Predicting how much overtime will be paid given an estimate of labor hours
_________ analytics are used to find hidden patterns and determine a likely value or class.
Predictive
_________ analytics identify a course of action based on observed past actions.
Prescriptive
The __________ subledger standard from the audit data standards covers data needed to evaluate purchases and payments.
Procure to Pay
The DuPont Analysis disaggregates return on equity (ROE) into which of the following components:
Profit Margin, Asset Turnover, Financial Leverage
Profit margin is an example of what type of ratios?
Profitability
ROE (Return on equity) is an example of what type of ratios?
Profitability
What regulatory body requires that all public company filers tag their financial statements in accordance with XBRL?
SEC
_____ are useful for identifying duplicate and/or missing transactions.
Sequence checks
The debt-to-equity ratio is an example of what type of ratios?
Solvency
_____ allows auditors to quickly see the maximum and minimum values.
Sorting data
What is the name of the output from data vendors to help compare companies using different XBRL tags for revenue?
Standardized metrics
______ can be used to simplify analysis by grouping data on specific data attributes, such as a state or zip code.
Stratification
_______________ statistics provide insight into the relative size of a number compared with the population.
Summary
The balanced scorecard includes all but the following metric?
Supply Chain and Human Resources
______ tests the impact of various input data on an expected output.
What-if scenario analysis
What is the term used to describe the process of assigning XBRL tags internally within a financial reporting/ enterprise system?
XBRL GL
As mentioned in the text, XBRL data vendors include Calcbench and _______________ .
XBRLAnalyst
XBRL is based on which language?
XML
The ___________ shows the relative position of a point of interest to the population.
Z-score
Evaluation of audit data may be distilled into ___________ that may be a function of exceptions and exposure.
a risk score
A basic premise underlying the application of _____________ is that plausible relationships among data may reasonably be expected to exist and continue in the absence of known conditions to the contrary.
analytical procedures
The auditors' role is to make sure appropriate _________ are used and that that the output correspond with management's assertions.
analytics
Continuous ___________ is a process that provides real-time assurance over business processes.
auditing or monitoring
CAATs are _________ scripts that can be used to validate data, test controls, and enable substantive testing.
automated or automatic
Predicting whether a company will be a going concern (or not a going concern) would be an example of _____.
classification
Separating transactions as either being fraudulent or not fraudulent would be an example of _____.
classification
Remote audit teams rely on electronic workpaper platforms as well as ____________ tools.
collaboration
The use of sparklines fits into which stage of the IMPACT model (introduced in chapter 1)?
communicate insights
It is important to ___________ check in with the users of the dashboard to learn how to _________ improve it and its usefulness.
continually
Dashboards tend to be monitored how often?
daily
Tax _____ allow tax departments to view multiple years, period, and jurisdictions and differing scenarios of data typically through use of a dashboard.
data analytics
Database maps and ________ define the location and types of data auditors will analyze.
data dictionaries
______ are defined as being a subset of the data warehouse oriented toward a specific need.
data marts
Dashboards should provide __________ views for ___________ users.
different; different
A Balanced Scorecard is an example of a _______________.
digital dashboard
The IRS has an algorithm called _______ that pulls historical data for average amount and type of deductions related to income and predicts the likelihood of underreported income.
discriminant function
External auditors generally __________ have rights to change the underlying accounting transactions.
do not
If the judgment making and decision making is __________ defined, a rule-based analytic could automatically assign a score for the auditor to review.
easily
Tax cost KPIs include _____.
effective tax rate expiration of tax credits deferred taxes
Audit working papers contain all of the following, EXCEPT
employee subledgers and auditor preferences
Tax efficiency and effectiveness KPIs include _______.
employee turnover of the tax personnel level of job satisfaction of the tax personnel level of technology/tax training amount of time spent on compliance vs. strategic activities
In a financial dictionary, which word would not be considered to be a negative word?
expense, liability, cost
True or false: A company has a completely separate information system solely collecting tax data.
false
True or false: Internal auditors are likely to specialize in one type of (or one specific) enterprise resource planning system.
false
True or false: The IRS exclusively uses tax data (W-2s, Form 1099, Schedule K-1) to profile taxpayer income and tax payments.
false
True or false: There are some KPIs that should be included in every Balanced Scorecard.
false
True or false: XBRL is only available for sophisticated investors, like financial analysts.
false
Which dictionary, according to researchers, is best in explaining and predicting financial user sentiment?
financial dictionary
Tax data used by the company typically comes from the _____.
financial reporting system
External auditors would be relatively more concerned than the internal auditors regarding which of the following?
financial statement quality
Companies that have grown organically (without many mergers or acquisitions) are more likely to have ___________.
homogeneous systems
A(n) _________ join will show only the records from both tables that match and exclude everything that doesn't match.
inner
The creation of a balanced scorecard or any type of digital dashboard is ________, just as the entire IMPACT cycle should be ____________ throughout any data analysis project.
iterative
In the modern audit, auditors will be free to use more ______ and refocus their efforts on testing the ______ used by the robots.
judgment; parameters
Under the fourth step (Address and refine results) of the IMPACT model used to implement Data Analytics in the audit, auditors would:
list expected exceptions to the analytics and expected remedial action by the auditor
Data analytics _________ may be framed by specific standards created by organizations such as the PCAOB.
methodology
The ______ of the audit plan directs the audit work.
methodology
An right join between employees (left table) and sales transactions (right table) would show:
only the employees involved in sales transactions
Working papers are essential to audit ________, performance and evaluation.
planning
The IRS mines and monitors personal data from social media to _____ taxpayers.
profile
Predicting the relationship between overtime incurred and worker productivity would be most appropriate for a _____ analysis.
regression
Understanding how the four components interact to answer different types of questions and meet different strategic goals is critical when it comes to identifying the _______________________.
right KPIs to include in a Balanced Scorecard
Automated bots do more of the ___________ tasks and leave the _________-level tasks to the human auditor.
routine; higher
Data analytics increasingly allows testing of the full population instead of _____.
sampling
A fuzzy match is used to join tables on:
similar values
What is defined as a small trendline of graphic that efficiently summarizes numbers or statistics in a graph without axes?
sparklines
Data vendors like Calcbench and XBRLAnalyst use _____ tags to allow financial statement comparisons between companies.
standardized
The balanced scorecard is based around a company's ____________.
strategy
Tax departments typically develop specific ______ to support the tax function.
tax data marts
The XBRL _______________ defines and describes each key data element.
taxonomy
The XBRL _______________ defines the relationships between each element such accounts payable being a component of current liabilities and current liabilities, in turn are a component of total liabilities..
taxonomy
What is not a reason that real-time reporting doesn't exist today?
technology to publish the financial statements
As mentioned in the text, financial ratio analysis is a key tool used by accounting, auditing, and finance professionals to do all but the following:
to assess the viability of the supply chain
True or false: Audit-related data may be available outside of the traditional financial reporting system.
true
True or false: Companies have the option of making their own, or customized tags, if they feel their financial data item does not fit within the existing taxonomy.
true
True or false: It does not make sense for some financial statement elements (such as goodwill or long-term debt) to be reported on a minute-by-minute basis.
true
True or false: Outlier detection may be used to identify suspicious or risky transactions.
true
True or false: The European Union is way ahead of the United States on use of Data Analytics in a tax audit, both by the regulator and the company hoping not to be audited.
true
True or false: The most important KPIs are placed in the top left corner because our eyes are most naturally drawn to that part of any page that we are reading.
true
True or false: There has been a shift of simply providing reasonable assurance on the processes to the additional assurance of the robots that are performing a lot of the menial audit work.
true
The IRS is particularly interested in profiling taxpayers that likely _____ income by pulling historical data for average amount and type of deductions related to income.
underreport
