Dr. Shen -- Ch. 7 (Visualization) and Ch. 8

Ways to improve visualization quality (aspect of simplification)

--Informative titles --Succinct but sufficient legends and axes --Avoid info. overload --Gridlines or data values whenever appropriate --Multiple formats (ex. combo chart) only when necessary --Use 3D only when necessary

What are the five elements an act MUST involve to be considered fraud?

1. A FALSE statement, representation, or disclosure 2. About a MATERIAL fact (something that induces a person to act) 3. An INTENT to deceive (knowledge that the statement was false when it was uttered) 4. A justifiable RELIANCE (the victim relies on the misrepresentation to take an action) 5. An INJURY or LOSS suffered by the victim

To show numeric data across DISCRETE variables, you should use which methods?

1. Bar chart/bar graph/bar plot/vertical bar chart 2. Column chart/rotated bar chart/horizontal bar chart 3. Bullet graph 4. Link data ONLY when a LOGICAL relationship exists

3 major problems with 3D charts

1. Blocking 2. Illusions (bars look taller) 3. Distortion via rotation

What are five INNOVATIVE versions of bar chart, scatterplot, histogram, line chart, and pie chart?

1. Bullet chart 2. Heatmap 3. Boxplot 4. Area chart 5. Treemap

Two rules for orientation

1. Change chart orientation when labels are inevitably long 2. Present/sort data meaningfully

3 types of data emphasis techniques

1. Highlighting (bringing attention to an item) 2. Weighting (the amount of attention an element attracts) 3. Ordering (intentional arrangement)

What are the four types of AIS threats?

1. Natural/political disasters 2. Software errors and equipment malfunction 3. Unintentional acts 4. Intentional acts (computer crimes)

3 general principles to avoid data deception

1. Proportional: Show representations of numbers prop. to the reported number (start y-axis at 0!!) 2. Time trend LEFT-RIGHT (don't do year reversal!) 3. Completeness: Present complete data given the context (don't hide years of net loss)

3 types of data simplification techniques

1. Quantity (Goldilocks principle -- "just right") 2. Distance (how far apart related info. is presented) 3. Orientation (appr. orientation helps understanding)

SEC's Plain English Disclosure Rules

1. SHORT sentences 2. Definite, CONCRETE, everyday language 3. ACTIVE voice 4. Tabular presentation or bullet lists for complex material, whenever possible 5. No legal JARGON or highly tech. business terms 6. No DOUBLE NEGATIVES

What are 3 critical basic visualization design principles?

1. Simplification (easy to interpret/understand) 2. Emphasis (the most imp. msg is easy to identify) 3. Ethical data presentation (not being deceptive)

What are three benefits of data visualization?

1. Visualized data is PROCESSED FASTER than written/tab. info 2. Visualizations are EASIER TO USE 3. Visualization supports DOMINANT LEARNING STYLE

Which type of pie chart compares 2-5 components?

2D pie chart

While ___% of occupational fraud involved MOA at a cost of _____, ___% involved FFR at a cost of _____.

92.7%; $93,000 7.9%; $1,000,000

What percentage of reported fraud cases involve MOA?

>90%

Which chart type is best for depicting trends over time? A. Area chart B. Bar chart C. Pie chart D. Histogram

A (Line chart is also a good answer)

Data Deception

A graphical depiction of information, designed with/without an intent to deceive, that may create a belief about the message and/or its components, which varies from the actual message

When you want to show the distribution of ONE numeric variable, use what?

A histogram

What does a bullet graph do?

Adds a "bullet" or small line by each bar that indicates an important BENCHMARK (ex: budgeted amounts, goals)

What is professional skepticism?

An attitude that includes a QUESTIONING MIND, being ALERT to conditions that might indicate possible misstatements de to fraud/error, and a CRITICAL assessment of audit evidence (They must remain alert for the possibility of the presence of material misstatements whether due to fraud or error THROUGHOUT the planning and performance of an audit)

Examples of indicative communication

Animations (grab your attention) Sound effects Symbols Colors -- high contrast

Fraud

Any INTENTIONAL deceit meant to DEPRIVE another person or party of their PROPERTY or RIGHTS

Visualization/Visual Analytics

Any static or dynamic visual representation of data (graph, diagram, animation, etc.)

Making an item in the data area of a viz larger to increase emphasis is an example of using which principle? A. highlighting B. weighting C. ordering D. It's a poor design choice; items should all be the same size

B

What are column charts called in Excel?

Bar Charts

Which type of pie chart compares 6-15 components?

Bar of Pie chart

"Auditor's Responsibility" pyramid diagram: Who has oversight of tone at the top, *oversees internal and external auditors*, oversees financial reporting, has a solid knowledge of the industry/business, and an understanding of fraud risks?

Board and Audit Committee

When you want to show more information of NUMEROUS variables in a spread, use what?

Boxplot or box-and-whisker plot

Pie charts are best used for displaying A. Changes in components over time B. The relationship between two quantitative variables C. Relative proportions at a specified period in time D. Trends or variability over time

C

Line chart purpose

Changes over an ORDINAL variable (ex. change over time)--> trends

Principles of informative communication

Clear; filter out all but relevant details; represent generalizations better than specifics

What are bar charts called in Excel?

Column Charts

A hospital has observed an increase in the number of cases of a disease and has asked an analyst to collect data on the cases over the last 3 years. The analyst noted that the disease appeared 3 years ago during the second quarter of the year. Since then, the third and fourth quarters of each year showed significant spikes in the number of cases when compared to the first two quarters. What is the best way to present these findings? A. Table, showing the number of cases in each month for the last 3 years B. Pie chart, showing the number of cases in each quarter for the last 3 years C. Scatter plot, showing the change in the number of cases for each quarter for the last 3 years D. Bar graph, showing the number of cases in each quarter for the last 3 years

D

Which of the following is NOT a good reason to visualize data? A. Users can find information more quickly with visualized data B. Visualized data is processed faster than written information C. Visualizations help the majority of people to learn better D. Building visualizations does not take as much time as writing a report

D

What are the three types of visual communications?

Decorative, indicative, and informative

Principles of decorative communication

Do not interfere with the clarity of other elements, if any (don't overly decorate)

"Auditor's Responsibility" pyramid diagram: Who has independence and objectivity, the ability to challenge management, the board, and the audit committee, and assesses fraud risks as part of audit planning and execution?

External Auditors

Which is referred to as "management fraud", MOA or FFR?

FFR

T/F: SAS-99 states that, even though auditors are not lawyers, they have the ability and responsibility to "make legal determinations of whether fraud has occurred"

False (BECAUSE they are not lawyers, they CAN'T make LEGAL determinations) --> Confidentiality agreement

T/F: (Color) Gradients are typically used to indicate progressions from high to low, whereas distinct colors represent categories

False (From low to high)

T/F: With bar charts, it's ideal to to show trends fewer than 7 periods

False (It's ideal to show fewer than 12 periods--if >12, use a LINE chart)

T/F: Auditing standards differentiate between an auditor's responsibility for errors vs. responsibility for fraud, since they have completely different root causes.

False (They make NO distinction in the responsibilities. The difference will be in the FOLLOW-UP process)

T/F: Fraud only has to have one of the important 5 elements to be considered fraud

False (It must have ALL 5 components to be considered fraud)

T/F: Scatter plots are used when there are two or more continuous variables

False (There are only TWO continuous variables for scatter plots. When a third variable is important, use bubble charts or heatmaps)

T/F: Fraud against companies may only be committed by an employee

False (They can also be committed by an external party)

General principle for all visual communication types

Find the balance to achieve the INTENDED GOAL (What is most important to emphasize depends on the PURPOSE of the document)

Examples of informative communication

Headings/titles Executive summary/highlights Headlines Bullet list Colors -- (stop sign red = "warning")

Fraudulent Financial Reporting

INTENTIONAL or reckless conduct, whether by act or omission, that results in MATERIALLY MISLEADING financial statements INTENTIONAL misstatements or omissions of AMIUNTS or DISCLOSURES with the INTENT to deceive users

Sabotage, computer fraud, misrepresentation, false use, or unauthorized disclosure of data are examples of what?

Intentional acts (computer crime/fraud)

"Auditor's Responsibility" pyramid diagram: Who has independence and objectivity, the ability to challenge management, the board, and the audit committee, and assesses fraud risks/monitors controls?

Internal Auditors

What's the benefit of a 100% stacked bar/area chart?

It uses less space to tell a better story

"Auditor's Responsibility" pyramid diagram: Who is primarily responsible for having a strong tone at the top, maintaining effective internal controls, and keeping a robust fraud risk management program?

Management

What are the two types of fraud, according to SAS No. 99?

Misappropriation of Assets (MOA) Fraudulent Financial Reporting (FFR)

What is often referred to as "defalcation" or "employee fraud"?

Misappropriation of assets

Fire/excessive heat, floods, earthquakes, high winds, war and terrorist attacks are examples of what?

Natural and political disasters

Bar chart purpose

Numeric vs. categorical

Which type of visualization if over-used and misused?

Pie chart

Which type of pie chart compares 6-10 components?

Pie of Pie chart

What does the cognitive-fit theory say?

Presentation needs to fit the need (ex. use Google Maps for getting home, use Google Earth for science project)

Pie chart purpose

Proportions

Scatterplot purpose

Relations; number vs. number

Principles of indicative communication

Separate, divide, distance, and contrast

Examples of decorative communication

Shapes/clip art/photos Colors -- to feel Fonts

Hardware or software failures, software errors or bugs, operating system crashes, power outages and fluctuations, and undetected data transmission errors are examples of what?

Software errors and equipment malfunction

Histogram purpose

Spread of data

Misappropriation of assets

The THEFT of company ASSET for PERSONAL GAIN, which involves theft, embezzlement, or misuse of company assets (e.g., fringe benefit)

Impression Management

The process through which financial information preparers try to control or manipulate the impressions other people form of them through disclosures and financial graphs

What's the difference between the 2002 SAS No. 99 revision and the original 1997 SAS No. 82 issuance regarding the auditor's responsibility to detect fraud?

Then newer issuance is more flexible in detecting AND PREVENTING fraud (not just detecting)

Why is a doughnut pie chart occasionally used?

To compare two pie charts (but not as well as an 100% stacked column/bar chart)

Purpose of decorative communication

To evoke feelings

Purpose of informative communication

To promote understanding

Purpose of indicative communication

To provoke action

Use a ___ to show the amount that each group/category contributes and to highlight HIERARCHY among data elements

Treemap

T/F: Area charts and stacked area charts can be used to show trends

True

T/F: Removing distance aids in understanding and removes other unnecessary information

True

T/F: You can NEVER reduce hardware/software errors or human errors to zero

True

T/F: The consequence of error, earnings management, and fraudulent financial reporting is the same across the board

True (And the consequence = misleading financial reporting/misinformed decision-making)

T/F: Grouped bar charts can be used to show TRENDS

True (but ONLY when "within-group" comparisons are important; otherwise, use line charts)

T/F: Line charts are the best way to show trends

True (can handle many PERIODS and multiple SERIES)

T/F: Bar charts can be used to shows TRENDS

True (for ONE series with FEW periods)

Accidents caused by: human carelessness, failure to follow established procedures, poorly trained or supervised personnel; innocent errors or omissions, lost destroyed or misplaced data, logic errors (bugs), or systems incapable of performing intended tasks are examples of what?

Unintentional acts

Expectations Gap

What people think accountants can do vs. what they can actually do

While the consequence of MOA for the company is _____, the consequence of FFR is _____.

asset loss; misleading information

While a children's book focuses more on the _____ features, traffic signs focus more on ______ features

decorative; indicative

MOA is to ___ frequency and ___ impact as FFR is to ___ frequency and ___ impact.

high; low low; high

While the frequency of hardware/software errors is _____, the monetary impacts on systems are _____. Preventionary measures beforehand include ______, detectionary measures during the problem are _____, and corrective measures afterwards involve ______.

high; low; I/S design, training, and implementation; easy; many procedures

Funnel charts are used to ____

highlight order

While error is unintentional, earnings management and fraudulent financial reporting is ______

intentional

An estimated 75-90% of computer crimes are perpetrated by ______.

knowledgeable insiders (former and current employees) (white collar criminals)

While both earnings management and fraudulent financial reporting are UNETHICAL, the first is considered _____ while the other is considered _____

legal; illegal

While the frequency of frauds is _____, the monetary impacts on systems are _____. Preventionary measures beforehand involve ______, detectionary measures during the problem are _____, and corrective measures afterwards involve ______.

low; high; internal control; hard (require strong internal control); internal control

While MOA is normally perpetrated at _____ levels of the organization hierarchy, embezzlements involving _____________ can involve much more significant amounts.

lower; top management

Auditors must maintain a level of ____ as they consider a broad set of information, including fraud risk factors, to identify and respond to fraud risk

professional skepticism

Radar charts are used to ___

profile 2-6 variables

A waterfall chart (popular) is used to ________; one downside to it is that it _________

reconcile differences; takes a lot of space

While the frequency of human errors is _____, the monetary impacts on systems are _____. Preventionary measures beforehand include ______, detectionary measures during the problem are _____, and corrective measures afterwards involve ______.

very high (the highest, actually); low; I/S design, training, and implementation; easy; many procedures

While the frequency of disasters is _____, the monetary impacts on systems are _____. Preventionary measures beforehand are ______, detectionary measures during the problem are _____, and corrective measures afterwards involve ______.

very low; very high; very limited; very easy; Disaster Recovery Plan or Backups

With bar charts, the CATEGORICAL data variable is plotted on the __ axis, and the NUMERIC data is plotted on the __ axis

x; y

With column charts, the CATEGORICAL data variable is plotted on the __ axis and the NUMERIC data on the __ axis

y; x