Week 5-2

Question 1

regressions in the audit

Answer 1

• Regression analysis
  o Relates a ‘dependent’ variable to one or more known independent variables
  o Assume: past relationships expect to continue in the future
• Aids auditor by
  o Generating the expectation
  o Determining if the difference between actual and expectation warrants investigation

Question 2

Analytical procedures in external auditing. Literature survey – Appelbaum, Kogan, Vasarhelyi (2019)
technieques in audit phases

Answer 2

Business analytics is ‘the use of data, information technology, statistical analysis, quantitative methods, and mathematical or computer-based models to help managers gain improved insight about their operations, and make better, fact-based decisions’
- External audit analytics (EEA): the utilization of various analytical procedures, methods, and models to facilitate the transformation of data into external audit evidence and subsequently into audit decision. EAA may be considered as a special sub-are of the wider are of Business Analytics (BA) since public auditors examine business financial data

Question 3

Audit data analytics (ADA) leads to

Answer 3

o Improved understanding of entities operations and risk
o Increased potential for detecting misstatements
o Improved communication with governance

Question 4

Implementation issues ADA

Answer 4

• Firms differ in their strategies on how to implement ADA
• Unclear how supervisory inspection authorities evaluate (like PCAOB) and accept ADA generated audit evidence
• Result: no implementation of the mandatory use of ‘advanced’ ADA tools
• Limited use of ADA will persist until incorporated in the audit methodologies, supported by standard setters and accepted by supervisory bodies