Chapter 9 Flashcards
(39 cards)
What is data analytics?
The science of analyzing data to draw conclusions
What does ADA stand for?
Audit data analytics
What does ADA do?
examine large datasets looking for outliers, trends and other useful information
What does data visualization involve?
The presentation of results from ADA as a image, chart or table
Why would you want a visualization of ADA?
It can help identify items that require further investigation + increase the effectiveness of communication
What stage of the audit is ADA used in?
It can be used at any stage.
Risk assessment
Risk response (testing controls, test of details, substantive analytical procedures)
Audit completion (help form a conclusion)
What is the visualization technique (description) and what is it helpful for?
Information presented visually
Helpful for risk assessment and identifying trends
What is the matching ADA technique and what is it helpful for?
Searching for items that should or shouldn’t match
Helpful for fraud identification and exception identification
What is the clustering ADA technique and what is it helpful for?
Grouping items together that have similar characteristics
It is helpful for exception identification and exception reduction
What is the statistical techniques ADA technique and what is it helpful for?
Regression analysis and data distribution
It is helpful for substantive analytics and exception identification.
What are the two types of data?
Structured and unstructured
What is structured data?
Resides in a fixed field within a record or file
It often includes data that is captured, processed, and maintained in an accounting system
What is unstructured data?
Data that does not reside in traditional data bases
What are examples of unstructured data?
Emails, social media, texts, images
What are important aspects for the auditor to understand about the data considerations
The auditor should have an understanding of what data the client has available
Should understand the size of the dataset
Should have direct access to read only data
Should understand the quality of data
What are key quality components that the auditor will use to assess the quality of data and its usability?
Consistency
Completeness
Cleaning (identifying and correcting missing, incorrect, and duplicate fields, and reformatting the data to be in a consistent format)
What are the 5 steps in the ADA process? (for planning performing and evaluating ADA)
- Plan the ADA
- Access and prepare the data
- Assess the data’s relevance and reliability
- Perform the ADA
- Evaluate the results
What is involved in step 1 of the ADA process (plan the ADA)?
Know the client and their data controls
Pick the right analytic test (based on preliminary risk)
Gather data and map the test
What is involved in step 2 of the ADA process (access and prepare the data)?
Access and prepare the data, evaluate the formal and quality, spot errors and clean the data before analysis
What is involved in step 3 of the ADA process (consider the data’s relevance and reliability)?
Judge whether the data fits the audits purpose and how trustworthy it is
Consider who gathered it, how it was collected, and whether strong internal controls governed its production
What is involved in step 4 of the ADA process (perform the ADA)?
Carry out the analysis
Flag any unexpected trends, outliers, or exception as a ‘notable item’ and follow up on each one
What is involved in step 5 of the ADA process (evaluate the results)?
Compare the ADA findings with the expectations
Investigate any notable items and draw a final audit conclusion
What would regression analysis be used for and what does the auditor need to establish to use it?
Can be used to compare the expected balance to the clients recorded balance and investigate any significant differences
Need to have a dependent (what you want to predict/test) and independent (factor(s) to explain it) variable
What is an example of using regression analysis
using square feet (independent variable) to predict sales (dependent variable)
