TEST BANK for Data Analytics for Accounting 3rd Edition by Vernon Richardson, Ryan Teeter & Katie Te

TEST BANK

TEST BANK

Chapter 1: Data Analytics for Accounting and Identifying the Questions Chapter 2: Mastering the Data Chapter 3: Performing the Test Plan and Analyzing the Results Chapter 4: Communicating Results and Visualizations Chapter 5: The Modern Accounting Environment Chapter 6: Audit Data Analytics Chapter 7: Managerial Analytics Chapter 8: Financial Statement Analytics Chapter 9: Tax Analytics Chapter 10: Project Chapter (Basic) Chapter 11: Project Chapter (Advanced): Analyzing Dillard’s Data to Predict Sales Returns

CHAPTER 1 TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.

1) Data analytics is the process of evaluating data with the purpose of drawing conclusions to address business questions. ⊚ true ⊚ false

2)

The process of data analytics aims to transform raw information into data to create value. ⊚ true ⊚ false

3) Data analytics has the potential to transform the manner in which companies run their businesses, however it is not practical in the near future. ⊚ true ⊚ false

4) Auditors can use social media to hear what customers are saying about a company and compare this to inventory obsolescence and other estimates. ⊚ true ⊚ false

5) Data analytics allows auditors to glean insights that are beneficial to the client, without breeching independence. ⊚ true ⊚ false

6) The predictive analytics is an important aspect of data analytics for auditors, but is not applicable for tax accountants. ⊚ true ⊚ false

7)

The I in IMPACT Cycle represents Identify the Question.

1

⊚ ⊚

true false

8)

The M in IMPACT Cycle represents Master the Data. ⊚ true ⊚ false

9)

The P in IMPACT Cycle represents Predict the Results. ⊚ true ⊚ false

10)

The A in IMPACT Cycle represents Analyze the Data. ⊚ true ⊚ false

11)

The C in IMPACT Cycle represents Continuously Track. ⊚ true ⊚ false

12)

The T in IMPACT Cycle represents Track Outcomes. ⊚ true ⊚ false

13) The IMPACT cycle is iterative, as insights are gained, outcomes are tracked, and new questions are identified. ⊚ true ⊚ false

14) Data analysis through data manipulation is performing basic analysis to understand the quality of the underlying data and its ability to address the business question. ⊚ true ⊚ false

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15)

To be proficient in data analysis, accountants need to become data scientists. ⊚ true ⊚ false

16) By developing an analytics mindset, accountants will be able to recognize when and how data analytics can address business questions. ⊚ true ⊚ false

17) While it is important for accountants to clearly articulate the business problem, drawing appropriate conclusions, based on the data, should be left to statisticians. ⊚ true ⊚ false

18) Analytic-minded accountants should report results of analysis in an accessible way to each varied decision maker and their specific needs. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.

19) With a goal to give organizations the information they need to make sound and timely business decisions, data analytics often involves all of the following except: A) technologies.

B) statistics.

C) strategies.

D) databases.

20) Patterns discovered from and risks and better plan for

blank enable businesses to identify opportunities blank.

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A) past archives; the future B) current data; the future C) current data; today D) past archives; today

21)

Which of the following best describes the goal of descriptive data analysis:

A) recognize what is meant by data quality, be it completeness, reliability or validity B) perform basic analysis to understand the quality of the underlying data and its ability to address the business question C) demonstrate ability to sort, rearrange, merge, and reconfigure data in a manner that allows enhanced analysis D) comprehend the process needed to clean and prepare the data before analysis

22)

Which of the following Microsoft software tool specializes in data joining?

A) Excel B) Power Query C) Power BI D) Power Automate

23)

Which of the following Microsoft software tools specializes in creating dashboards?

A) Excel B) Power Query C) Power BI D) Power Automate

24)

Which of the following Tableau software tools specializes in data transformation?

4

A) Tableau Desktop B) Tableau Prep Builder C) Tableau Public D) Tableau Visualize

25)

Which of the following Tableau software tools specializes in creating dashboards?

A) Tableau Desktop B) Tableau Prep Builder C) Tableau Public D) Tableau Visualize

26)

Which of the following best describes the goal of data quality:

A) recognize what is meant by data quality, be it completeness, reliability or validity B) perform basic analysis to understand the quality of the underlying data and its ability to address the business question C) demonstrate ability to sort, rearrange, merge, and reconfigure data in a manner that allows enhanced analysis D) comprehend the process needed to clean and prepare the data before analysis

27)

Which of the following best describes the goal of data manipulation:

A) recognize what is meant by data quality, be it completeness, reliability or validity B) perform basic analysis to understand the quality of the underlying data and its ability to address the business question C) demonstrate ability to sort, rearrange, merge, and reconfigure data in a manner that allows enhanced analysis D) comprehend the process needed to clean and prepare the data before analysis

28)

Which of the following best describes the goal of data scrubbing and data preparation:

5

A) recognize what is meant by data quality, be it completeness, reliability or validity B) perform basic analysis to understand the quality of the underlying data and its ability to address the business question C) demonstrate ability to sort, rearrange, merge and reconfigure data in a manner that allows enhanced analysis D) comprehend the process needed to clean and prepare the data before analysis

29)

Which of the following best describes the goal of developing an analytics mindset:

A) recognize when and how data analytics can address business questions B) perform basic analysis to understand the quality of the underlying data and its ability to address the business question C) recognize what is meant by data quality, be it completeness, reliability or validity D) comprehend the process needed to clean and prepare the data before analysis

30)

Which of the following best describes the goal of data visualization and data reporting:

A) recognize when and how data analytics can address business questions B) perform basic analysis to understand the quality of the underlying data and its ability to address the business question C) recognize what is meant by data quality, be it completeness, reliability or validity D) report results of analysis in an accessible way to each varied decision maker and their specific needs

31) Which of the following best describes the goal of defining and addressing problems through statistical data analysis: A) recognize what is meant by data quality, be it completeness, reliability or validity B) perform basic analysis to understand the quality of the underlying data and its ability to address the business question C) demonstrate ability to sort, rearrange, merge and reconfigure data in a manner that allows enhanced analysis D) identify and implement an approach that will use statistical data analysis to draw conclusions and make recommendations on a timely basis

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32) While accountants don't need to become data scientists, they must know how to do the following except: A) Clearly articulate the business problem the company is facing B) Communicate with the data scientists about specific data needs and understand the underlying quality of the data C) Build a data repository D) Comprehend the process needed to clean and prepare the data before analysis

33) Data analytics professionals estimate that they spend between time cleaning data so it can be analyzed.

blank of their

A) 50 percent and 90 percent B) 10 percent and 20 percent C) 20 percent and 50 percent D) 70 percent and 95 percent

34) Which approach to data analytics attempts to estimate or predict, for each unit, the numerical value of some variable using some type of statistical model?

A) Similarity matching.

B) Classification.

C) Data reduction.

D) Regression.

35) Which approach to data analytics attempts to characterize the typical behavior of an individual, group or population by generating summary statistics about the data?

A) Similarity matching.

B) Profiling.

C) Data reduction.

D) Regression.

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36) Since some transactions need more attention than others, the data reduction approach would arguably be most important for the blank function.

A) audit B) tax.

C) management accounting.

D) Regression.

37) Which approach to data analytics attempts to reduce the amount of information that needs to be considered to focus on the most critical items?

A) Similarity matching.

B) Profiling.

C) Data reduction.

D) Regression.

38)

Which of the following best describes the classification approach to data analytics?

A) An attempt to assign each unit (or individual) in a population into a few categories.

B) An attempt to identify similar individuals based on data known about them.

C) An attempt to divide individuals into groups in a useful or meaningful way.

D) An attempt to discover associations between individuals based on transactions involving them.

39)

Which of the following best describes the clustering approach to data analytics?

A) An attempt to assign each unit (or individual) in a population into a few categories.

B) An attempt to identify similar individuals based on data known about them.

C) An attempt to divide individuals into groups in a useful or meaningful way.

D) An attempt to discover associations between individuals based on transactions involving them.

8

40)

Which of the following best describes the similarity matching approach to data analytics?

A) An attempt to assign each unit (or individual) in a population into a few categories.

B) An attempt to identify similar individuals based on data known about them.

C) An attempt to divide individuals into groups in a useful or meaningful way.

D) An attempt to discover associations between individuals based on transactions involving them.

41)

Which of the following best describes the regression approach to data analytics?

A) An attempt to estimate or predict, for each unit, the numerical value of some variable using some type of statistical model.

B) An attempt to predict a relationship between two data items.

C) An attempt to divide individuals into groups in a useful or meaningful way.

D) An attempt to discover associations between individuals based on transactions involving them.

42) Which of the following best describes the co-occurrence grouping approach to data analytics?

A) An attempt to characterize the typical behavior of an individual, group or population by generating summary statistics about the data.

B) An attempt to predict a relationship between two data items.

C) An attempt to reduce the amount of information that needs to be considered to focus on the most critical items.

D) An attempt to discover associations between individuals based on transactions involving them.

43)

Which of the following best describes the link prediction approach to data analytics?

9

A) An attempt to characterize the typical behavior of an individual, group or population by generating summary statistics about the data.

B) An attempt to predict a relationship between two data items.

C) An attempt to reduce the amount of information that needs to be considered to focus on the most critical items.

D) An attempt to discover associations between individuals based on transactions involving them.

44)

Which of the following best describes the profiling approach to data analytics?

A) An attempt to characterize the typical behavior of an individual, group or population by generating summary statistics about the data.

B) An attempt to predict a relationship between two data items.

C) An attempt to reduce the amount of information that needs to be considered to focus on the most critical items.

D) An attempt to discover associations between individuals based on transactions involving them.

45)

Which of the following best describes the data reduction approach to data analytics?

A) An attempt to characterize the typical behavior of an individual, group or population by generating summary statistics about the data.

B) An attempt to predict a relationship between two data items.

C) An attempt to reduce the amount of information that needs to be considered to focus on the most critical items.

D) An attempt to discover associations between individuals based on transactions involving them.

46) Which approach to data analytics attempts to discover associations between individuals based on transactions involving them?

10

A) Similarity matching.

B) Clustering.

C) Co-occurrence grouping.

D) Link prediction.

47) Which approach to data analytics attempts to identify similar individuals based on data known about them?

A) Similarity matching.

B) Clustering.

C) Co-occurrence grouping.

D) Link prediction.

48) Which approach to data analytics attempts to predict a relationship between two data items?

A) Similarity matching.

B) Clustering.

C) Co-occurrence grouping.

D) Link prediction.

49) Which approach to data analytics attempts to divide individuals into groups in a useful or meaningful way?

A) Similarity matching.

B) Clustering.

C) Co-occurrence grouping.

D) Link prediction.

50)

The IMPACT cycle includes all the following processes except:

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A) Identify the questions.

B) Address and refine results.

C) Track outcomes.

D) Predict the results.

51)

One of the most important aspects of data analytics that impacts tax is: A) predictive analytics.

B) co-occurrence grouping.

C) similarity matching.

D) data quality.

52)

If we are predicting which companies go bankrupt, bankruptcy would be the A) dependent variable B) independent variable C) explanatory variable D) classification variable

53) If a bank uses credit risk score to determine who will receive a loan, the credit risk score would be considered the: A) dependent variable B) independent variable C) response variable D) classification variable

54) If a bank uses credit risk score to determine who will receive a loan, the variable predicting who will receive a loan would be considered the:

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A) dependent variable B) independent variable C) determinant variable D) classification variable

55)

The 4V’s of Big Data include all but the following: A) volatility B) variety C) velocity D) veracity

56) A recent study from McKinsey Global Institute estimates that Data Analytics could generate up to $2 blank in value.

A) billion B) trillion C) million D) thousand

57) The PwC’s 6th Annual Digital IQ survey of more than 1,400 leaders from digital business, the area of investment that tops CEOs’ list of priorities is: A) information technology B) capital expenditures including hardware and software C) accounting data analytics D) business analytics

58) According to PwC’s 18th Annual Global CEO survey, executive officers put a high value on data analytics.

blank percent of chief

13

A) 95 B) 86 C) 55 D) 35

59) According to the text, as the debt-to-income ratio increases, there is chance of a loan getting rejected by the bank.

blank

A) a greater B) a lesser C) no effect on the

60) According to the text, as the length of employment increases, there is chance of a loan getting rejected by the bank.

blank

A) a greater B) a lesser C) no effect on the

61) According to the text, as the credit score increases, there is loan getting rejected by the bank.

blank chance of a

A) a greater B) a lesser C) no effect on the

62)

In the LendingClub dataset, a credit score is synonymous with:

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A) a debt score.

B) a risk score.

C) a credit card score.

D) a premium score.

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

63) List and describe the eight (8) different approaches to data analytics.

64) List and explain four (4) of the seven (7) data analytic skills needed by analytic-minded accountants:

65) As more and more data are available, some would argue that the role of accounting is changing. While accountants don't need to become data scientists, they must develop a base level skill set. Whether they are the Director of Tax for Hewlett Packard or their external auditor, which basic skills are needed by an analytic-minded accountant?

66) What is the regression approach? How might the regression approach be used in auditing?

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67) Assume that you have just started a new job as a credit manager for a Fortune 500 company. Using all steps in the IMPACT Cycle, provide examples of tasks that would be performed as part of each step and state the information/data you would need to make a decision if a customer is credit worthy.

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Answer Key Test name: Chap 01_3e_Richardson 1) TRUE 2) FALSE 3) FALSE 4) TRUE 5) TRUE 6) FALSE 7) TRUE 8) TRUE 9) FALSE 10) FALSE 11) FALSE 12) TRUE 13) TRUE 14) FALSE 15) FALSE 16) TRUE 17) FALSE 18) TRUE 19) C 20) A 21) B 22) B 23) C 24) B 25) A 26) A 17

27) C 28) D 29) A 30) D 31) D 32) C 33) A 34) D 35) B 36) A 37) C 38) A 39) C 40) B 41) A 42) D 43) B 44) A 45) C 46) C 47) A 48) D 49) B 50) D 51) A 52) A 53) B 54) A 55) A 56) B 18

57) D 58) B 59) A 60) B 61) B 62) B 63) Answers may vary slightly! ● Classification — An attempt to assign each unit (or individual) in a population into a few categories. ● Regression — An attempt to estimate or predict, for each unit, the numerical value of some variable using some type of statistical model. ● Similarity matching — An attempt to identify similar individuals based on data known about them. ● Clustering — An attempt to divide individuals (like customers) into groups (or clusters) in a useful or meaningful way. ● Co-occurrence grouping — An attempt to discover associations between individuals based on transactions involving them. ● Profiling — An attempt to characterize the "typical" behavior of an individual, group or population by generating summary statistics about the data (including mean, standard deviations, etc.). ● Link prediction — An attempt to predict a relationship between two data items. ● Data reduction — A data approach that attempts to reduce the amount of information that needs to be considered to focus on the most critical items (i.e., highest cost, highest risk, largest IMPACT, etc.).

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64) Answers will vary but should include some of these items. ● Developing an analytics mindset — recognize when and how data analytics can address business questions. ● Data scrubbing and data preparation — comprehend the process needed to clean and prepare the data before analysis. ● Data quality — recognize what is meant by data quality, be it completeness, reliability or validity. ● Descriptive data analysis — perform basic analysis to understand the quality of the underlying data and its ability to address the business question. ● Data analysis through data manipulation — demonstrate ability to sort, rearrange, merge and reconfigure data in a manner that allows enhanced analysis. ● Defining and addressing problems through statistical data analysis — identify and implement an approach that will use statistical data analysis to draw conclusions and make recommendations on a timely basis. ● Data visualization and data reporting — report results of analysis in an accessible way to each varied decision maker and their specific needs.

65) Answers will vary! ● Clearly articulate the business problem the company is facing, ● Communicate with the data scientists about specific data needs and understand the underlying quality of the data. ● Draw appropriate conclusions to the business problem based on the data and make recommendations on a timely basis, and ● Present their results to individual members of management (CEOs, audit managers, etc.) in an accessible manner to each member.

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66) Answers will vary!

Regression is an attempt to estimate or predict, for each unit, the numerical value of some variable using some type of statistical model.

Given a balance of total accounts receivable held by a client, auditors can use a regression analysis to estimate the appropriate level of allowance for doubtful accounts for bad debts.

67) Answers will vary! A potential answer might include: Process: Example or Information need: Identify the Question Who is the customer?

What is the credit amount requested?

What are the terms of payment?

How is their financial performance, relative to their competitors?

Master the Data

What is their:

● Liquidity ratio,

● Effectiveness or turnover ratios,

● Financial leverage ratios,

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● Profitability ratios,

● Ratios of debt service.

Perform Test Plan

Possible approaches

● Regression

● Profiling

● Data reduction

Address and Refine Results

● Examine correlations

● Request additional data

● Discuss with colleagues

● Rerun analysis

Communicate Insights

Provide answer (yes/no) to customer. If yes, provide amount of credit limit and payment

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terms.

Track Outcomes

● Monitor customer aging and payment trends

● Revisit as necessary

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CHAPTER 2 TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.

1) Mastering the data requires a firm understanding of what data is available to you and where it is stored, as well as being skilled in the process of extracting, transforming, and loading (ETL). ⊚ true ⊚ false

2) A flat file is 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. ⊚ true ⊚ false

3) A foreign key is an attribute that is required to exist in each table of a relational database and serves as the unique identifier for each record in a table. ⊚ true ⊚ false

4) A primary key is an attribute that is required to exist in each table of a relational database and serves as the unique identifier for each record in a table. ⊚ true ⊚ false

5) A foreign key is an attribute that exists in relational databases in order to carry out the relationship between two tables. ⊚ true ⊚ false

6) A composite primary key is made up of the three or more primary keys in the tables that it is linking. ⊚ true ⊚ false

1

7) Descriptive attributes are attributes that exist in relational databases that are neither primary nor foreign keys. ⊚ true ⊚ false

8) Once you have extracted the data of interest, it will need to be validated for completeness and existence. ⊚ true ⊚ false

9)

The M in IMPACT Cycle represents Manipulating the Data. ⊚ true ⊚ false

10) In order to obtain the right data, it is important to have a firm grasp of what data is available and how it is stored. ⊚ true ⊚ false

11)

Data normalization can reduce data redundancy and improve data integrity. ⊚ true ⊚ false

12)

Much like the IMPACT cycle, requesting data is often an iterative process. ⊚ true ⊚ false

13)

Unlike the IMPACT cycle, requesting data is not an iterative process. ⊚ true ⊚ false

14) If the extraction and transformation steps have been done correctly, the loading part of the ETL process should be the simplest step.

2

⊚ ⊚

true false

15) After obtaining the data and determining the purpose and scope of the data request, the next step is to validate the data. ⊚ true ⊚ false

16)

Formatting negative numbers is an example of cleaning the data. ⊚ true ⊚ false

17)

A template can make communication easier between data requestor and provider. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.

18) Mastering the data can also be described via the ETL process. The ETL process stands for: A) Extract, total, and load data.

B) Extract, transform, and load data.

C) Enter, transform, and load data.

D) Enter, total, and load data.

19) All of the following are Audit Data Standards (ADS) developed by the American Institute of Certified Public Accountants except: A) Investments subledger standards B) General Ledger standards C) Procure-to-Pay subledger standards D) Order-to-Cash subledger standards

3

20) When using [EmployeeID] as the unique identifier of the Employee table, [EmployeeID] is an example of which of the following: A) Foreign key B) Composite key C) Primary key D) Key attribute

21)

What would be the best primary key for the LendingClub rejected loan dataset?

A) Loan application number B) Zip code C) Customer number D) Loan number

22)

The objective of data extraction is: A) To validate the data for completeness and integrity B) To load the data into the appropriate tool for analysis C) To identify and obtain the data from the appropriate source D) To identify which approach to data analytics should be used

23)

The objective of data transformation is: A) To validate the data for completeness and integrity B) To load the data into the appropriate tool for analysis C) To identify and obtain the data from the appropriate source D) To identify which approach to data analytics should be used

24)

The objective of loading data is:

4

A) To validate the data for completeness and integrity B) To load the data into the appropriate tool for analysis C) To identify and obtain the data from the appropriate source D) To identify which approach to data analytics should be used

25)

All of the following are included in the five steps of the ETL process except: A) Determine the purpose and scope of the data request B) Obtain the data C) Validate the data for completeness and integrity D) Scrub the data

26) Which of the following best exemplifies a way that data will need to be cleaned after extraction and validation?

A) Remove headings and subtotals B) Validate date/time fields C) Remove trailing zeroes D) Compare string limits for text fields

27)

Removing headings or subtotals from data is an example of which of the following?

A) Validating the data for completeness B) Validating the data for integrity C) Cleaning the data D) Obtaining the data

28)

Correcting inconsistencies across data is an example of which of the following?

5

A) Validating the data for completeness B) Validating the data for integrity C) Cleaning the data D) Obtaining the data

29)

Formatting negative numbers in the data is an example of which of the following?

A) Validating the Data for Completeness B) Validating the Data for Integrity C) Cleaning the Data D) Obtaining the Data

30) Removing leading zeroes and non-printable characters from the data is an example of which of the following?

A) Validating the data for completeness B) Validating the data for integrity C) Cleaning the data D) Obtaining the data

31) Comparing descriptive statistics for numeric fields within the data is an example of which of the following?

A) Validating the data for completeness B) Validating the data for integrity C) Cleaning the data D) Obtaining the data

32) Comparing the number of records within the data is an example of which of the following?

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A) Validating the data for completeness B) Validating the data for integrity C) Cleaning the data D) Obtaining the data

33) Which of the following questions are NOT suggested by the Institute of Business Ethics to allow a business to create value from data use and analysis, and still protect the privacy of stakeholders?

A) How does the company use data, and to what extent is it integrated into firm strategy?

B) Does the company send a privacy notice to individuals when their personal data is collected?

C) Is the data kept in a secure location preventing access from unauthorized users?

D) Does the company have the appropriate tools to mitigate the risks of data misuse?

34) Which of the following questions are NOT suggested by the Institute of Business Ethics to allow a business to create value from data use and analysis, and still protect the privacy of stakeholders?

A) Does our company conduct appropriate due diligence when sharing with or acquiring data from third parties?

B) How does the company use data, and to what extent is it integrated into firm strategy?

C) Does the company send a privacy notice to individuals when their personal data is collected?

D) Does the company require analysts to sign a confidentiality agreement the information found in the data?

35)

Which of the following best describes the purpose of a primary key?

A) To uniquely identify each row in a table.

B) To create the relationship between two tables.

C) To provide business information, but are not required to build a database.

D) To support business processes across the organization.

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36)

Which of the following best describes the purpose of a non-key attribute?

A) To ensure that each row in the table is unique B) To create the relationship between two tables C) To provide business information D) To support business processes across the organization

37)

Which of the following best describes the purpose of relational databases?

A) To ensure that business rules are enforced B) To increase information redundancy in the organization C) To provide business information to data analysts D) To support business processes across the organization

38)

Which of the following best describes the purpose of a foreign key?

A) To ensure that each row in the table is unique B) To create the relationship between two tables C) To provide business information D) To support business processes across the organization

39)

A data dictionary is paramount in helping data analysts do which of the following?

A) Maintain databases.

B) Identify the data they need to use.

C) Communicating insights.

D) Track outcomes.

40) A data dictionary is paramount in helping database administrators do which of the following?

8

A) Maintain databases.

B) Identify the data they need to use.

C) Communicating insights.

D) Track outcomes.

41) At which step of the ETL process should you try to answer the question "What tools will be used to perform data analytic tests or procedures and why?"

A) Step 1: Determine the purpose and scope of the data request.

B) Step 2: Obtain the data.

C) Step 3 or 4: Transformation.

D) Step 5: Loading the data for data analysis.

42) At which step of the ETL process should you try to answer the question "What other information will impact the nature, timing and extent of the data analysis?"

A) Step 1: Determine the purpose and scope of the data request.

B) Step 2: Obtain the data.

C) Step 3 or 4: Transformation.

D) Step 5: Loading the data for data analysis.

43) At which step of the ETL process should you try to answer the question "What business problem will the data address?"

A) Step 1: Determine the purpose and scope of the data request.

B) Step 2: Obtain the data.

C) Step 3 or 4: Transformation.

D) Step 5: Loading the data for data analysis.

44) At which step of the ETL process should you try to answer the question "Where are the data located in the financial or other related systems?"

9

A) Step 1: Determine the purpose and scope of the data request.

B) Step 2: Obtain the data.

C) Step 3 or 4: Transformation.

D) Step 5: Loading the data for data analysis.

45) When obtaining the data yourself, you should do all of the following before you begin except: A) Identify the tables that contain the information you need.

B) Identify which attributes specifically hold the information you need in each table.

C) Identify how those tables are related to each other.

D) Identify any errors or issues from the extraction.

46) There are a variety of methods that you could take to retrieve the data, including SQL. What does SQL stand for?

A) Systems Query Language.

B) Systems Question Language.

C) Structured Question Language.

D) Structured Query Language.

47)

All of the following are benefits of using a normalized relational database except: A) Completeness.

B) No redundancy.

C) Business rules are enforced.

D) Data is stored in one place.

48)

Which of the following is most likely to be the primary key in an Employee table?

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A) Employee ID B) Employee Social Security Number C) Employee Name D) Employee Type

49) Comparing the number of records that were extracted to the number of records in the source database is an example of which ETL step.

A) Validating the Data B) Obtaining the Data C) Cleaning the Data D) Loading the Data for Analysis

50) Which of the following describes a means of maintaining all of your data in one place, instead of across different related tables?

A) Flat File B) Microsoft Access C) SQL lite D) Microsoft SQL Server

51)

Which of the following is NOT true regarding Primary Keys?

A) The purpose of the primary key is to uniquely identify each column in a table.

B) A primary key is typically a sequential number instead of something truly descriptive about each record.

C) Primary keys are required in each table in a relational database.

D) Primary keys do not provide meaningful business information.

52) Relational databases help to reduce redundant data. Which of the following is NOT a reason to reduce redundant data?

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A) It takes up unnecessary space B) It is expensive C) It increases the risk of data-entry errors D) It is easier to perform analysis in spreadsheets

53)

What is the purpose of the Audit Data Standards?

A) To provide a guide to standardize audit data requests B) To increase the cost of audits C) To help auditors learn SQL code D) To create standardized data storage systems

54) There are many times when using SQL is the best option for extracting data, but sometimes it is not preferred. Which of the following is an example of when SQL would NOT be a preferred method of data extraction?

A) When the data is already stored in Excel B) When the data is stored across different tables in a relational database C) When the data in the table you wish to analyze is too large for Excel’s resources D) When you wish to extract precise attributes and records that fit your criteria

55)

What is one of Excel’s tools for joining data from two separate spreadsheets?

A) SUMIF B) VLOOKUP C) SQL D) DATAREQUEST

56)

What is one of Excel’s tools is roughly equivalent to the VLOOKUP function?

12

A) INDEX/MATCH B) SELECT C) LINK D) LINKUP

57)

What follows the ETL process of “Validating the Data”?

A) Loading the Data for Analysis B) Obtain the data C) Determining the scope of the data request D) Cleaning the data

58)

What follows the ETL process of “Obtaining the Data”?

A) Loading the Data for Analysis B) Obtain the data C) Validating the data for completeness and integrity D) Cleaning the data

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

59) Chapter 2 describes the various ways in which data can be stored for differing purposes.

Describe the two ways data can be organized and the purpose for each organizational structure.

13

60) Taylor is a new staff accountant for a fortune 100 company. After hearing that she just successfully completed an Accounting Data Analytics course, her boss said, "Get me a listing of all our deadbeat customer, so I can cut off their credit." After asking clarifying questions, Taylor was able to determine that root request was "Which customer, with a credit limit over $10,000, have more than $5,000 outstanding for more than 90 days at the prior quarter's end?" Using the ETL Techniques, briefly describe the process Taylor will have to complete to answer her boss' question. (Assume that Taylor does not have direct access to the data, rather the data will be exported into an Excel file, and she will complete the analysis with an Excel Pivot Table.)

61)

Define and give 1 example of a primary key, a foreign key, and non-key attribute.

62) Assume that you will be up for a promotion next month and you'd like to analyze a database that was recently assigned to you to show off your data analytic skills. After identifying the goal of your data analysis, using the first step of the IMPACT cycle, what steps would you take if you have direct access to the database?

63) Assume that you have just completed the extraction process on a data set. As you begin validating the data for completeness and integrity, you notice an error. Describe the steps you might take to determine the source of an error.

14

15

Answer Key Test name: Chap 02_3e_Richardson 1) TRUE 2) TRUE 3) FALSE 4) TRUE 5) TRUE 6) FALSE 7) TRUE 8) FALSE 9) FALSE 10) TRUE 11) TRUE 12) TRUE 13) FALSE 14) TRUE 15) TRUE 16) TRUE 17) TRUE 18) B 19) A 20) C 21) A 22) C 23) A 24) B 25) D 26) A 16

27) C 28) C 29) C 30) C 31) A 32) A 33) C 34) D 35) A 36) C 37) D 38) B 39) B 40) A 41) B 42) A 43) A 44) B 45) D 46) D 47) D 48) A 49) A 50) A 51) A 52) D 53) A 54) A 55) B 56) A 17

57) D 58) C 59) Answers may vary slightly!

A relational database, is the type of database you are most likely to come across when extracting and using accounting and financial data.

While it is often preferred to analyze data from a flat file (e.g., in an Excel spreadsheet, in which all the data are stored in one place), when it comes to storing data and maintaining data integrity, a relational database is preferred because of its ability to maintain "one version of the truth" across multiple data elements.

60) Answers will vary but should include some of these items. ● EXTRACTION: Taylor completed step 1 by asking her boss clarifying question to determine purpose and scope of the data request.

To complete step 2 she should complete a template to request the data from the system administrator. ● TRANSFORMATION: For step 3, Taylor will need to validate the data for completeness and integrity. She can compare the total AR balance of the data extracted to the gross AR amount on the financial statement from the prior quarter's end. For step 4, Taylor should clean the data by removing headings or subtotals, ensuring formatting is consistent, etc. ● LOADING: No additional loading is necessary as the analysis will be run in Excel.

18

61) Answers will vary! ● The purpose of the primary key is to ensure that each row in the table is unique, so it is often referred to as a "unique identifier."a.Each table must have a primary key. The primary key is typically made up of one column, but it can occasionally be made up of a combination of columns. It is rarely truly descriptive; instead, a collection of letters of simply sequential numbers are often used. The purpose of a primary key is to uniquely identify each row in the table. ● The purpose of the foreign key is to create the relationship between two tables. The relationship is created by placing a foreign key in one of the two tables that are related.a.Whenever two tables are related, one of those tables must contain a foreign key to create the relationship. The foreign key is special type of attribute as it must be the primary key in a related table. ● The other columns in a table are descriptive attributes.a.Primary and foreign keys facilitate the structure of a relational database, and the descriptive attributes provide actual business information.

62) Answers may vary!

1. Identify the tables that contain the information you need. You can do this by looking through the data dictionary or the relationship model.

2. Identify which attributes, specifically, hold the information you need in each table.

3. Identify how those tables are related to each other.

19

63) Answers will vary! A potential answer might include: If an error is found, depending on the size of the dataset, you may be able to easily find the missing or erroneous data by scanning it with your eyes. However, if the dataset is large, or if the error is difficult to find, it may be easiest to go back to the extraction and examine how the data was extracted, fix any errors in the SQL code, and re-run the extraction.

20

CHAPTER 3 TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.

1) The P in IMPACT Cycle represents performing test plan. ⊚ true ⊚ false

2) Data reduction is a data approach used to reduce the amount of information that needs to be considered to focus on the most critical items. ⊚ true ⊚ false

3) Regression is a data approach used to estimate or predict, for each unit, the numerical value of some variable using some type of statistical model. ⊚ true ⊚ false

4) Link prediction is a data approach used to estimate or predict, for each unit, the numerical value of some variable using some type of statistical model. ⊚ true ⊚ false

5)

Co-occurrence grouping could be used to match vendors by geographic region. ⊚ true ⊚ false

6) Fuzzy matching is a data approach used to identify similar fields that may indicate a match between records. ⊚ true ⊚ false

7) Alibaba and its attempt to identify seller and customer fraud based on various characteristics known about them is an example of similarity matching.

1

⊚ ⊚

true false

8) An example of classification would be a credit card company flagging a transaction as being approved or potentially being fraudulent and denying payment. ⊚ true ⊚ false

9) When considering a question such as "Do our customers form natural groups based on similar attributes?" you would use an unsupervised approach. ⊚ true ⊚ false

10)

Co-occurrence grouping is an example of a supervised approach. ⊚ true ⊚ false

11) The data approach used to characterize the typical behavior of an individual, group or population by generating summary statistics about the data is referred to as classification. ⊚ true ⊚ false

12) XBRL is used to facilitate the exchange of financial reporting information between the company and the Securities and Exchange Commission. ⊚ true ⊚ false

13)

Benford’s Law is an absolute and all data must conform. ⊚ true ⊚ false

14) Clustering is a data approach used to divide individuals into groups in a useful or meaningful way.

2

⊚ ⊚

true false

15)

Data profiling typically involves unstructured data. ⊚ true ⊚ false

16)

A decision tree can be used to divide data into smaller groups. ⊚ true ⊚ false

17) Existing data that have been manually evaluated and assigned a class is often referred to as test data. ⊚ true ⊚ false

18) Fuzzy matching is a computer-assisted technique of finding matches that are less than 100 percent perfect by finding correspondences between portions of the text of each potential match. ⊚ true ⊚ false

19)

A target is a manually assigned category applied to a record based on an event. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.

20) All of the following are examples of a supervised approach to evaluation data except:

3

A) Causal modeling B) Data reduction C) Link prediction D) Regression

21)

Diagnostic analytics include all of the following except: A) Similarity matching B) Clustering C) Profiling D) All of the choices are correct

22) The global standard for exchanging financial reporting information that uses XML is called blank.

A) XBRL B) XFRL C) Yahoo! Finance D) Bloomberg

23)

The acronym XBRL stands for

blank.

A) eXtensible Business Reporting Language B) eXtensive Business Reporting Language C) eXtensive Business Reporting Lingo D) eXtensive Business Reporting Language

24) Financial statements are tagged according to the XBRL common universal definitions.

blank that links it to

4

A) links B) taxonomy C) data dictionary D) term sheet

25) Which of the following best describes an unsupervised approach to the evaluation of data?

A) Data exploration that is free from oversight by a superior B) Data exploration to examine the relationships between variables that are hypothesized to exist C) Data exploration looking for potential patterns of interest D) Data exploration that is conducted with direct oversight by a superior

26)

Which of the following best describes a supervised approach to the evaluation of data?

A) Data exploration that is free from oversight by a superior B) Data exploration that is conducted with direct oversight by a superior C) Data exploration to examine the relationships between variables that are hypothesized

to exist D) Data exploration looking for potential patterns of interest

27) Which approach to data analytics attempts to assign each unit in a population into a small set of categories?

A) Classification B) Regression C) Similarity matching D) Co-occurrence grouping

28) Which approach to data analytics attempts to divide individuals into groups in a useful or meaningful way?

5

A) Clustering B) Data reduction C) Similarity matching D) Co-occurrence grouping

29) The blank statistical concept that assigns a value to a number based on how many standard deviations it stands from the mean?

A) z-score B) F-score C) q-score D) median

30)

The cutoff for the second quartile of a distribution is its

blank.

A) mean B) 75th percentile C) 25th percentile D) median

31) Which approach to data analytics attempts to identify similar individuals based on data known about them?

A) Classification B) Clustering C) Similarity matching D) Co-occurrence grouping

32) Which approach to data analytics attempts to discover associations between individuals based on transactions involving them?

6

A) Classification B) Regression C) Similarity matching D) Co-occurrence grouping

33) Which approach to data analytics attempts to forecast a relationship between two data items?

A) Link prediction B) Regression C) Similarity matching D) Co-occurrence grouping

34) Which approach to data analytics attempts to predict, for each unit, the numerical value of some variable?

A) Classification B) Regression C) Similarity matching D) Link prediction

35) Which approach to data analytics attempts to characterize the typical behavior of an individual, group or population by generating summary statistics about the data?

A) Classification B) Regression C) Profiling D) Link prediction

36) Using social media to look for relationships between related parties that are not otherwise disclosed to identify related party transactions is an example of blank.

7

A) Classification B) Regression C) Profiling D) Link prediction

37) Short surveys regarding dining preferences, sometimes requested at the bottom of a restaurant bill, are an attempt to collect data that will facilitate which data approach?

A) Clustering B) Regression C) Similarity matching D) Link prediction

38) What is the analytics type for procedures that explore the current data to determine why an outcome has happened?

A) Prescriptive B) Predictive C) Diagnostic D) Descriptive

39) What is the analytics type for procedures that work to identify the best possible options given constraints or changing conditions?

A) Prescriptive B) Predictive C) Diagnostic D) Descriptive

40) What is the analytics type for procedures that summarize existing data to determine what has happened in the past?

8

A) Prescriptive B) Predictive C) Diagnostic D) Descriptive

41) The decision support systems approach is most associated with the analytics type.

blank

A) Prescriptive B) Predictive C) Diagnostic D) Descriptive

42) Retail stores often request customers' zip codes at the end of a sales transaction. This is an example of which data approach?

A) Clustering B) Regression C) Similarity matching D) Classification

43)

Data reduction typically involves the following steps except: A) Identify the attribute you would like to reduce to focus on more relevant fields.

B) Identify the parameters of the model.

C) Filter the results.

D) Interpret the results.

44) Data profiling is used to assess data quality and internal controls and typically involves the following steps except:

9

A) Filter the results.

B) Identify the objects or activity you want to profile.

C) Determine the types of profiling you want to perform.

D) Set boundaries or thresholds for the activity.

45)

Data that are stored in a database or spreadsheet that is readily searchable is called blank.

A) Training data B) Unstructured data C) Structured data D) Test data

46) In many naturally occurring collections of numbers, the leading significant digit is likely to be small is called blank.

A) Leading digits hypothesis B) Moore's law C) Benford's law D) Classification

47) 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

48)

Regression analysis typically involves the following steps except:

10

A) Identify the variables that might predict an outcome.

B) Identify the parameters of the model.

C) Set boundaries or thresholds.

D) Determine the functional form of the relationship.

49) Regression might be used to predict an interest rate given to borrower by the lender based on certain risk characteristics. In this regression, the dependent variable would be which of the following?

A) Risk characteristics.

B) Interest rate.

C) Demographic characteristics.

D) Loan acceptance.

50) Regression might be used to predict an interest rate given to borrower by the lender based on certain risk characteristics. In this regression, potential independent variables would be which of the following?

A) Risk characteristics.

B) Interest rate.

C) Demographic characteristics.

D) Loan acceptance.

51)

When working with a predictive model, underfitting the data is most likely caused by blank.

A) an overly complex model B) an overly simple model C) over pruning the data D) a lack of data reduction

52)

In general, the more complex the model, the greater the chance of

blank.

11

A) Overfitting the data B) Underfitting the data C) Pruning the data D) The need to reduce the amount of data considered

53) While overfitting data could lead to an error rate of 0 (zero), it is unlikely that you would be able to blank your results.

A) define B) specify C) articulate D) generalize

54)

Which of the following best describes an independent variable?

A) Output B) Input C) Application D) Operation

55)

Which of the following best describes a dependent variable?

A) Output B) Input C) Application D) Operation

56) Understanding and predicting inventory obsolescence is an important determination for retail companies. When using competitor selling prices to estimate the inventory obsolescence reserve, the inventory obsolescence reserve represents which of the following:

12

A) Independent variable B) Dependent variable C) Function D) Statistical Model

57) Understanding and predicting warranty expense is an important determination for manufacturing firms. When using historical claims data to estimate the current period's warranty expense, the historical claims data represents which of the following: A) Independent variable B) Dependent variable C) Function D) Statistical Model

58) One of the key tasks of auditors of a bank is to consider the amount of the loan loss reserve. When developing a model to estimate the current year's loan loss reserve amount, which of the following would be least likely to be included as an independent variable?

A) Original loan approval amount B) Customer loan history C) Current aged loans D) Collections success

59) and

Training data are existing data that have been manually evaluated and assigned a class blank are existing data used to evaluate the model.

A) Control data B) Test data C) Unstructured data D) Structured data

60)

The split between one class and another class is called:

13

A) decision trees.

B) identifying questions.

C) decision boundaries.

D) linear classifiers.

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

61) What is the difference between structured data and unstructured data? Provide an example of each.

62) Decision trees are used to divide data into smaller groups by splitting the data at each branch into two or more groups. However, this method could lead to unintended consequences if the decision tree is not pruned. Describe the pruning process, when it can occur and the benefits.

63) Chapter 3 discusses four data analytics approaches that may be used to address our accounting questions. List and define the four data analytics approaches. Next, describe how each of the four data analytics approaches you list could be used by credit card companies to identify fraudulent credit card activity.

14

64) Assume that you will be up for a promotion next month and you'd like to impress your boss with your data analytic skills. The company you work for normally books the current month's bad debit for the same amount as the prior month's actual accounts receivable write-offs.

Using your general accounting knowledge, explain why this process is not the best method.

Next, assuming that you will use a regression analysis, explain the process and describe the data/information you would request/include to perform the analysis.

65) Benford's Law (be sure to answer all 3 parts): Part A: Briefly describe Benford's Law. Part B: Draw a graph that exemplifies data which conforms to Benford's Law (i.e., what it should look like).

Part C: Briefly describe how auditors could utilize Benford's Law while conducting testwork.

15

Answer Key Test name: Chap 03_3e_Richardson 1) TRUE 2) TRUE 3) TRUE 4) FALSE 5) TRUE 6) FALSE 7) TRUE 8) TRUE 9) TRUE 10) FALSE 11) FALSE 12) TRUE 13) FALSE 14) TRUE 15) FALSE 16) TRUE 17) FALSE 18) TRUE 19) FALSE 20) B 21) D 22) A 23) A 24) B 25) C 26) C 16

27) A 28) A 29) A 30) D 31) C 32) D 33) A 34) B 35) C 36) D 37) A 38) C 39) A 40) D 41) A 42) A 43) B 44) A 45) C 46) C 47) C 48) C 49) B 50) A 51) B 52) A 53) D 54) B 55) A 56) B 17

57) A 58) A 59) B 60) C 61) Answers may vary slightly! ● Structured data are data that are organized and reside in a fixed field with a record or a file. Examples include: Relational database, spreadsheet, or other formats that are readily searchable by search algorithms. ● Unstructured data are data that either does not have a pre-defined data model or is not organized in a pre-defined manner. Examples include: Photographs, Instagram, Twitter, or satellite Images.

62) Answers will vary but should include some of these items.

1.Pruning removes branches from a decision tree to avoid overfitting the model.2.Pre-pruning occurs during the model generation. The model stops creating new branches when the information usefulness of an additional branch is low.

3.Post-pruning evaluates the complete model and discards branches after the fact.

18

63) Descriptive analytics: Procedures that summarize existing data to

determine what has happened in the past. ● Credit card companies could calculate summary statistics to determine the volume of transactions.

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, diagnostic analytics allow users to drill-down in the data and see how it compares to a budget, a competitor, or trend. ● Data reduction could be used to reduce the amount of information that needs to be considered to focus on the most critical items (i.e., highest cost, highest risk, largest impact, etc.) such as looking at the only transactions over a certain dollar threshold. ● Profiling could be used to characterize the "typical" behavior of an individual, group or population by generating summary statistics about the data (including mean, standard deviations, etc.), such as looking to characteristics such as the amounts, totals, and types of expenditures to identify potential anomalies. For example, depending on the individual's spending history, a $1,000 purchase at Spools and Bolts (a quilting shop) might not be an anomaly. ● Clustering could be used to divide individuals (like customers) into groups (or clusters) in a useful or meaningful way, such as a heat map to determine if purchases are outside of the person's "home" region.

Predictive analytics:Procedures used to generate a model that can be used to determine what is likely to happen in the future. Examples of predictive analytics include regression analysis, forecasting, classification, and other predictive modeling. ● Classification could be used to establish models to predict fraud and decide whether to accept or reject a proposed credit card transaction. A potential model may be the following: Transaction approval = f(location 19

of current transaction, location of last transaction, amount of current transaction, prior history of travel of credit card holder, etc.) ● Regression could be used to estimate or predict fraud and decide whether to accept or reject a proposed credit card transaction. A potential model may be the following: Transaction approval = f(location of current transaction, location of last transaction, amount of current transaction, prior history of travel of credit card holder, etc.)

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. These models could be used to identify accounts that are likely to engage in fraudulent behavior and require additional verification before a transaction could occur.

20

64) Answers may vary!

1. GAAP states that the allowance must still be established in the same

accounting period as the sale but is based on an anticipated and estimated figure. Using the prior month's actual write-offs does not follow the matching principal. Also, this method does not account for year-to-year or month-to-month fluctuation.

2. Regression analysis involves the following process:3.Identify the variables that might predict an outcome.4.Independent variables: Current AR aging, Customer payment history, Collections success, Current month's sales.

5.Determine the functional form of the relationship.6.Produce a scatter plot of sales to actual write-offs over time to determine the prior relationship, which can be used to estimate current and future relationships.

7.Identify the parameters of the model.8.Identify the relative weights of each variable.

9.Identify the tables that contain the information you need. You can do this by looking through the data dictionary or the relationship model.

21

65) Answers will vary!

Part A: ● The law states that in many naturally occurring collections of numbers, the leading significant digit is likely to be small. For example, in sets that obey the law, the number 1 appears as the most significant digit about 30% of the time, while 9 appears as the most significant digit less than 5% of the time. ● The real world is more likely to have a low number as the first digit (e.g., 1 or 2) than a high number (e.g., 8 or 9). Benford used this realization to predict the likelihood of digit frequencies across a wide variety of data, including financial data.

Part B: {MISSING IMAGE} Part C: ● Benford's Law can help identify unusual accounting activity. ● Auditors can compare the frequency of digits predicted by Benford's Law to the actual frequency in a data file. Any category of numbers outside of expectations (with a margin for error) should be investigated further.

22

CHAPTER 4 TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.

1) After completing data analysis, the write-up should include only the steps of the IMPACT model that are most significant. ⊚ true ⊚ false

2)

Qualitative data is categorical data. ⊚ true ⊚ false

3)

Nominal data is the simplest form of data. ⊚ true ⊚ false

4)

The primary statistic used with qualitative data is proportion. ⊚ true ⊚ false

5)

Both nominal and ordinal data can also be referred to as data-driven. ⊚ true ⊚ false

6) If you are comparing two datasets that follow the normal distribution, even if the two datasets have very different means, you can still compare them by standardizing the distributions with Z-scores. ⊚ true ⊚ false

7)

Ratio data is considered the most sophisticated type of data. ⊚ true ⊚ false

1

8)

Interval data is more sophisticated than ratio data. ⊚ true ⊚ false

9)

Continuous data is data that can take on any value within a range. ⊚ true ⊚ false

10) Discrete data is data that can be represented by any number, including whole numbers and fractions. ⊚ true ⊚ false

11) Declarative visualizations are the product of wanting to declare or present your findings to an audience. ⊚ true ⊚ false

12) The charts most frequently considered for depicting quantitative data are bar charts, pie charts and stacked bar charts. ⊚ true ⊚ false

13)

Data visualizations should not be used to satisfy an exploratory purpose. ⊚ true ⊚ false

14)

There are very few methods for visualizing quantitative data. ⊚ true ⊚ false

2

15) When work is completed with qualitative data, it will most frequently be visualized using the tools in Quadrant 1, the declarative, data-driven quadrant. ⊚ ⊚

true false

16) The normal distribution is a phenomenon that many naturally occurring datasets in our world follow. ⊚ true ⊚ false

17)

The value of 0 in interval data is simply another number on the scale. ⊚ ⊚

true false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.

18) 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

19)

The four chart types include quantitative, qualitative, exploratory and:

A) diagnostic data.

B) descriptive data.

C) expository data.

D) declarative data.

20)

Red, Yellow, and Blue would be best described as an example of:

3

A) nominal data.

B) ordinal data.

C) structured data.

D) continuous data.

21)

Letter grades of A, B, and C would be best described as an example of: A) nominal data.

B) ordinal data.

C) ratio data.

D) interval data.

22) Polar bears, brown bears, black bears, and panda bears would be best described as an example of: A) nominal data.

B) ordinal data.

C) ratio data.

D) interval data.

23)

Latitude and longitude would be best described as an example of: A) nominal data.

B) ordinal data.

C) ratio data.

D) discrete data.

24)

The following are typical examples of nominal data except:

4

A) grade point average.

B) zip codes.

C) eye color.

D) gender.

25)

The following are typical examples of nominal data except: A) marital status.

B) state of residency.

C) temperature.

D) nationality.

26)

The following are typical examples of nominal data except: A) hair color.

B) eye color.

C) gender.

D) height.

27)

The following are typical examples of ordinal data except: A) distance.

B) position in a race.

C) hardness of a mineral.

D) military rank.

28)

The following are typical examples of ordinal data except: A) blood type by population.

B) political affiliation.

C) education level.

D) letter grade.

5

29)

The following are typical examples of ratio data except: A) currency.

B) temperature.

C) length.

D) weight.

30)

The following are typical examples of ratio data except: A) weight.

B) birth date.

C) height.

D) pulse rate.

31)

Results using the Fahrenheit scale would be best described as an example of: A) nominal data.

B) ordinal data.

C) ratio data.

D) interval data.

32)

The following are typical examples of interval data except: A) time.

B) temperature.

C) standardized exam score.

D) type of car owned.

33)

The following are characteristics of interval data except:

6

A) measured.

B) ordered.

C) equidistant.

D) meaningful zero.

34)

The standard normal distribution has a:

A) mean of 0 and a standard deviation of 1.

B) mean of 1 and a standard deviation of 1.

C) mean of 1 and a standard deviation of 0.

D) mean of 0 and a standard deviation of 0.

35) In a standard normal distribution, if the mean of the distribution is 0, then the median and mode equal blank.

A) −1 B) 0 C) 1 D) cannot be determined

36)

SAT scores, IQ scores, and heights and weights of newborn babies follow a:

A) normal distribution.

B) standard normal distribution.

C) poisson distribution.

D) cannot be determined.

37)

Data that is represented by whole numbers is called:

7

A) continuous data.

B) discrete data.

C) interval data.

D) ordinal data.

38)

Visualizations that present findings to an audience are called: A) declarative visualizations.

B) static visualizations.

C) exploratory visualizations.

D) interactive visualizations.

39)

The following chart types are preferred for depicting qualitative data except a: A) line chart.

B) pie chart.

C) bar chart.

D) stacked bar chart.

40)

The following chart types are preferred for depicting quantitative data except: A) scatter plots.

B) box plots.

C) line chart.

D) pie chart.

8

41)

The chart below is an example of a:

A) word map.

B) word cloud.

C) word chart.

D) word plot.

42)

Which of the following charts best visualizes a Bar chart?

9

A)

B)

C)

D)

43) Which type of chart is preferred for when quartiles, median, and outliers are required for analysis and insights?

A) Scatter plots B) Box and whisker plots C) Line chart D) Pie chart

44) Which type of chart is best described as useful for identifying the correlation between two variables, for identifying a trend line, or line of best fit?

10

A) Scatter plots B) Box and whisker plots C) Line chart D) Pie chart

45) When considering the color theme for a visualization, which is the best color theme for a color blind audience?

A) Orange/blue scale B) Red/green scale C) Gray scale D) Red/blue scale

46)

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

47)

Which of the following is not an example of discrete data?

A) Points earned in a basketball game B) Points earned in a hockey game C) Points earned in a diving match D) Points earned in a soccer game

48)

Quantitative data is more complex than:

11

A) exploratory data.

B) qualitative data.

C) test data.

D) training data.

49) Which of the following is not one of the four main questions to consider when creating your data scale and increments?

A) How much data should be displayed in the visualization?

B) Should outliers be displayed?

C) What scale should be used to display the data?

D) Which colors should be displayed?

50) After completing your data analysis, the write-up should include a discussion of which of the following?

A) Only the steps of the IMPACT model you consider important B) Only the steps of the IMPACT model your client will understand C) All steps of the IMPACT model D) All steps of the IMPACT model your client will understand

51) As discussed in the book and consistent with the writings of author Justin Zobel, your written business communications should be directed towards: A) your supervisor.

B) your reviewer.

C) your audience.

D) your customer.

52) Which type of data and visualizations are used for presenting findings to your audience and are more often associated with traditional data visualizations?

12

A) Conceptual B) Declarative C) Exploratory D) Quantitative

53) Which type of data and visualizations are used for gaining insights and generating ideas while interacting with your data?

A) Conceptual B) Declarative C) Exploratory D) Quantitative

54)

Which charts work best for depicting proportion?

A) Pie Chart and Stacked Bar Chart B) Pie Chart and Line Chart C) Line Chart and Word Cloud D) Bar Chart and Box and Whisker Plot

55)

Which chart work best for depicting progression over time?

A) Pie Chart B) Line Chart C) Word Cloud D) Box and Whisker Plot

56)

What is the preferred number to start a scale at in a bar chart?

13

A) 0 B) 5 numbers below the lowest number in your dataset C) The lowest number in your dataset D) The median of your dataset

57) Which of the following is not a tool you should use to maximize your charts for a colorblind audience?

A) Avoid a red/green color pallet B) Use a orange/blue color pallet C) Convert your chart to grayscale to check the constrast D) Use natural increments in your data scale such as 1s or 100s

58)

Which of the following is NOT true about crafting a written communication?

A) Take the opportunity to introduce new acronyms and jargon to your audience.

B) Consider the best way to provide the information to your intended audience.

C) Always place your audience as the focus of your writing to help you maintain an appropriate tone.

D) Prepare your audience for what’s next in your analysis, such as quarterly reports or specific trends to pay attention to over time.

59)

The percentage of individuals that prefer visual content over written content is:

A) more than 90 percent.

B) less than 40 percent.

C) approximately 60 percent.

60) On Facebook, the interaction rate of photos is blank; as compared to a 4 percent interaction rate for other types of posts, such as links or texts. suggesting a preference for visualizations over plain text.

14

A) more than 80 percent B) less than 40 percent C) approximately 50 percent

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

61) Given that Anscombe’s Quartet showed the inherent difference between statistics and visualizations, how shall results be communicated to decision makers?

15

Answer Key Test name: Chap 04_3e_Richardson 1) FALSE 2) TRUE 3) TRUE 4) TRUE 5) FALSE 6) TRUE 7) TRUE 8) FALSE 9) TRUE 10) FALSE 11) TRUE 12) FALSE 13) FALSE 14) FALSE 15) FALSE 16) TRUE 17) TRUE 18) B 19) D 20) A 21) B 22) A 23) C 24) A 25) C 26) D 16

27) A 28) B 29) B 30) B 31) D 32) D 33) D 34) A 35) B 36) A 37) B 38) A 39) A 40) D 41) B 42) B 43) B 44) A 45) A 46) C 47) C 48) B 49) D 50) C 51) C 52) B 53) C 54) A 55) B 56) A 17

57) D 58) A 59) A 60) A 61) Answers may vary slightly!

Anscombe’s Quartet shows that statistics and visualizations alone are often insufficient to communicate the outcomes of data analytics, but 91 percent of people prefer visual content over written content.

18

CHAPTER 5 TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.

1) A flat file is a single table of data with user-defined attributes. ⊚ true ⊚ false

2)

Heterogeneous systems represent one single installation or instance of a system. ⊚ true ⊚ false

3) Production systems are those active systems that collect, report, and are directly affected by current transactions. ⊚ true ⊚ false

4) Systems translator software maps the various tables and fields from varied ERP systems into a consistent format. ⊚ true ⊚ false

5)

Heterogeneous systems represent multiple installations or instances of a system. ⊚ true ⊚ false

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

7) 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.

1

⊚ ⊚

8)

true false

A flat file is a double table of data with user-defined attributes. ⊚ true ⊚ false

9) Production systems are those active systems that collect, report, and are directly affected by future transactions. ⊚ true ⊚ false

10) Systems translator software maps the various tables and fields from varied EMR systems into a consistent format. ⊚ true ⊚ false

11) 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 ⊚ false

12) The Inventory Subledger Standard of the AICPA Audit Data Standards defines product master data, location data, inventory on hand data, and inventory movement. ⊚ true ⊚ false

13) The General Ledger Standard of the AICPA Audit Data Standards adds the chart of accounts, source listings, trial balance, and GL detail. ⊚ true ⊚ false

2

14) The Procure to Pay Subledger Standard of the AICPA Audit Data Standards identifies data needed for purchase orders, goods received, invoices, payments, and adjustments to accounts. ⊚ ⊚

true false

15) The Order to Cash Subledger Standard of the AICPA Audit Data Standards focuses on sales orders, accounts receivable, shipments, invoices, cash receipts and adjustments to accounts. ⊚ true ⊚ false

16) An audit plan consists solely of a methodology which directs the audit work and includes substantive testing. ⊚ true ⊚ false

17) Both simple and complex data analytics can be applied to a client’s data during the planning stage of the audit to identify which areas the auditor should focus on. ⊚ true ⊚ false

18)

The evaluation of audit data may be distilled into a feasibility score. ⊚ true ⊚ false

19) Data analytics and audit automation allow auditors to occasionally monitor and ignore the systems and processes within their companies. ⊚ true ⊚ false

20) Continuous auditing is a process that provides real-time assurance over business processes and systems.

3

⊚ ⊚

true false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.

21) 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) information systems audits.

B) social media audits.

C) compliance audits.

D) forensic audits in the case of fraud.

22) 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) financial statement audits.

B) archaic audits.

C) process efficiency audits.

D) forensic audits.

23) 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) management audits.

D) compliance audits.

24) Which Accounting Data Standard identifies data needed for purchase orders, goods received, invoices, payments, and adjustments to accounts?

4

A) Base Standard B) General Ledger Standards C) Procure to Pay Subledger Standard D) Inventory Subledger Standard

25) Which Accounting Data Standard identifies product master data, location data, inventory on hand data, and inventory movement?

A) Base Standard B) General Ledger Standards C) Procure to Pay Subledger Standard D) Inventory Subledger Standard

26) Which Accounting Data Standard focuses on sales orders, accounts receivable, shipments, invoices, cash receipts and adjustments to accounts?

A) General Ledger Standards B) Order to Cash Subledger C) Procure to Pay Subledger Standard D) Inventory Subledger Standard

27) Which Accounting Data Standard defines the format for files and fields as well as some master data for users and business units?

A) Base Standard B) General Ledger Standards C) Order to Cash Subledger D) Procure to Pay Subledger Standard

28) Which Accounting Data Standard includes the chart of accounts, source listings, trial balance, and GL (journal entry) detail?

5

A) Base Standard B) General Ledger Standards C) Order to Cash Subledger D) Procure to Pay Subledger Standard

29) Which of the following best defines the Accounting Data Standards: Inventory Subledger?

A) Focuses on sales orders, accounts receivable, shipments, invoices, cash receipts and adjustments to accounts.

B) Identifies data needed for purchase orders, goods received, invoices, payments, and adjustments to accounts.

C) Adds the chart of accounts, source listings, trial balance, and GL (journal entry) detail.

D) Defines product master data, location data, inventory on hand data, and inventory movement.

30) Which of the following best defines the Accounting Data Standards: Procure to Pay Subledger?

A) Focuses on sales orders, accounts receivable, shipments, invoices, cash receipts and adjustments to accounts.

B) Identifies data needed for purchase orders, goods received, invoices, payments, and adjustments to accounts.

C) Adds the chart of accounts, source listings, trial balance, and GL (journal entry) detail.

D) Defines product master data, location data, inventory on hand data, and inventory movement.

31) Which of the following best defines the Accounting Data Standards: Order to Cash Subledger?

6

A) Focuses on sales orders, accounts receivable, shipments, invoices, cash receipts, and adjustments to accounts.

B) Identifies data needed for purchase orders, goods received, invoices, payments, and adjustments to accounts.

C) Adds the chart of accounts, source listings, trial balance, and GL (journal entry) detail.

D) Defines product master data, location data, inventory on hand data, and inventory movement.

32)

Which of the following best defines the Accounting Data Standards: General Ledger?

A) Focuses on sales orders, accounts receivable, shipments, invoices, cash receipts and adjustments to accounts.

B) Identifies data needed for purchase orders, goods received, invoices, payments, and adjustments to accounts.

C) Adds the chart of accounts, source listings, trial balance, and GL (journal entry) detail.

D) Defines the format for files and fields as well as some master data for users and business units.

33)

Which of the following best defines the Accounting Data Standards: Base Standard?

A) Focuses on sales orders, accounts receivable, shipments, invoices, cash receipts and adjustments to accounts.

B) Identifies data needed for purchase orders, goods received, invoices, payments, and adjustments to accounts.

C) Adds the chart of accounts, source listings, trial balance, and GL (journal entry) detail.

D) Defines the format for files and fields as well as some master data for users and business units.

34)

Which of the following describes a homogenous systems approach?

7

A) Ensures that all of its divisions and subsidiaries use a uniform installation of the chosen ERP system.

B) Allows all divisions and subsidiaries use the ERP system that works best for each location.

C) Provides a single table of data with user-defined attributes that is stored separate from any application.

D) Maps the various tables and fields from multiple ERP systems.

35)

Which of the following describes an example of a flat file?

A) Ensures that all of its divisions and subsidiaries use a uniform installation of the chosen ERP system.

B) Allows all divisions and subsidiaries use the ERP system that works best for each location.

C) Provides a single table of data with user-defined attributes that is stored separate from any application.

D) Maps the various tables and fields from multiple ERP systems.

36)

Which of the following describes an example of a production system?

A) Collects, reports, and is directly affected by current transactions.

B) Allows all divisions and subsidiaries to use the ERP system that works best for each location.

C) Provides a single table of data with user-defined attributes that is stored separately from any application.

D) Maps the various tables and fields from multiple ERP systems.

37)

Which of the following describes a heterogeneous system approach?

8

A) Ensures that all of its divisions and subsidiaries use a uniform installation of the chosen ERP system.

B) Allows all divisions and subsidiaries to use the ERP system that works best for each location.

C) Provided a single table of data with user-defined attributes that is stored separately from any application.

D) Maps the various tables and fields from multiple ERP systems.

38)

Which of the following is an example of systems translator software?

A) Collects, reports, and is directly affected by current transactions.

B) Allows all divisions and subsidiaries to use the ERP system that works best for each location.

C) Provides a single table of data with user-defined attributes that is stored separately from any application.

D) Maps the various tables and fields from multiple ERP systems.

39) Which of the following ensures that all of its divisions and subsidiaries use a uniform installation of one ERP system?

A) Continuous reporting.

B) Continuous monitoring.

C) The heterogeneous systems approach.

D) The homogenous systems approach.

40) Which of the following 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.

B) Continuous monitoring.

C) The heterogeneous systems approach.

D) The homogenous systems approach.

9

41)

Which of the following constantly evaluates internal controls and transactions?

A) Continuous reporting.

B) Continuous monitoring.

C) The heterogeneous systems approach.

D) The homogenous systems approach.

42) Which of the following provides the status of the system so that an auditor can know at any given time whether the system is operating within the parameters?

A) Continuous reporting B) Continuous monitoring C) The heterogeneous systems approach D) The homogenous systems approach

43) Continuous auditing relies heavily on alarms, which are essentially notifications of a classification problem. What occurs when too many alarms are false positives?

A) Flood of alarms.

B) Exception report.

C) A negative event.

D) Data warehouse.

44) Continuous auditing relies heavily on alarms, which are essentially notifications of a classification problem. What occurs when a normal transaction is classified as problematic?

A) False negative.

B) True negative.

C) True positive.

D) False positive.

10

45) Continuous auditing relies heavily on alarms, which are essentially notifications of a classification problem. What occurs when an abnormal transaction is classified as problematic?

A) False negative.

B) True negative.

C) True positive.

D) False positive.

46) Continuous auditing relies heavily on alarms, which are essentially notifications of a classification problem. What occurs when a normal transaction is not classified as problematic?

A) False negative.

B) True negative.

C) True positive.

D) False positive.

47) Continuous auditing relies heavily on alarms, which are essentially notifications of a classification problem. What is an abnormal transaction that is not classified as problematic?

A) False negative.

B) True negative.

C) True positive.

D) False positive.

48) A repository of data accumulated from internal and external data sources, including financial data, to help management decision making is called a: A) flat file.

B) data warehouse.

C) homogenous system.

D) heterogeneous system.

49) 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 is called a:

11

A) database diagram.

B) common data model.

C) data dictionary.

D) data warehouse.

50) Chapter 5 discusses the essential properties of working papers. With respect to data analytics, working papers should contain the following items except: A) work programs used to document the audit procedures to collect, manipulate, model, and evaluate data.

B) evidence, including performance evaluations, of the competency of the auditors completing the working paper.

C) database maps and data dictionaries that define the location and types of data auditors will analyze.

D) documentation about existing automated controls, including parameters and variables used for analysis.

51) Chapter 5 discusses the essential properties of working papers. With respect to data analytics, working papers should contain the following items except: A) work programs used to document the audit procedures to collect, manipulate, model, and evaluate data.

B) evidence, including data extracts, transformed data, and model output that provides support for the functioning controls and management assertions.

C) superseded drafts of working papers or financial statements, notes that reflect incomplete or preliminary thinking, previous copies of documents corrected for typographical or other errors, and duplicates of documents.

D) documentation about existing automated controls, including parameters and variables used for analysis.

52) Chapter 5 discusses the essential properties of working papers. With respect to data analytics, working papers should contain the following items except:

12

A) work programs used to document the audit procedures to collect, manipulate, model, and evaluate data.

B) IT-related documentation, including flowchart and process maps that provide system understanding.

C) database maps and data dictionaries that define the location and types of data auditors will analyze.

D) memos to future auditors documenting issues with problem members of the client’s management team.

53) Chapter 5 discusses the essential properties of working papers. With respect to data analytics, working papers should contain the following items except: A) work programs used to document the audit procedures to collect, manipulate, model, and evaluate data.

B) IT-related documentation, including flowchart and process maps that provide system understanding.

C) database maps and data dictionaries that define the location and types of data auditors will analyze.

D) documentation of every matter considered during the audit.

54) 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.

55)

Microsoft Teams or Slack are examples of:

13

A) collaboration tools.

B) electronic workpaper platforms.

C) audit evidence tools.

D) audit testing tools.

56)

TeamMate or Xero are examples of:

A) collaboration tools.

B) electronic workpaper platforms.

C) audit evidence tools.

D) audit testing tools.

57)

PWC uses all but the following systems to automate its audit process?

A) Halo B) Sky C) Aura D) Connect

58) Working papers should include all but the following items (as they relate to data analytics).

A) Work programs B) IT-related documentation C) Algorithms used in analysis D) Data extracts

59) Working papers should include all but the following items (as they relate to data analytics).

14

A) Regression algorithms used in analysis B) Documentation about existing automated controls C) Database maps D) Evidence including data extracts

60)

All of the following are standards used in an audit methodology except:

A) PCAOB B) COBIT C) COSO D) FASAC

61) The blank 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

62) The blank of the audit consists of a methodology, the scope of the audit, the potential risk areas, and procedures and specific tasks the audit team will execute.

A) formal evaluation B) procedures and specific tasks C) plan D) IMPACT model

63) The blank included in the audit plan typically include tests of controls and substantive tests of transaction details.

15

A) procedures and specific tasks B) methodology C) scope D) potential risk areas

16

Answer Key Test name: Chap 05_3e_Richardson 1) TRUE 2) FALSE 3) TRUE 4) TRUE 5) TRUE 6) TRUE 7) FALSE 8) FALSE 9) FALSE 10) FALSE 11) FALSE 12) TRUE 13) TRUE 14) TRUE 15) TRUE 16) FALSE 17) TRUE 18) FALSE 19) FALSE 20) TRUE 21) B 22) B 23) C 24) C 25) D 26) B 17

27) A 28) B 29) D 30) B 31) A 32) C 33) D 34) A 35) C 36) A 37) B 38) D 39) D 40) C 41) B 42) A 43) A 44) D 45) C 46) B 47) A 48) B 49) B 50) B 51) C 52) D 53) D 54) C 55) A 56) B 18

57) B 58) C 59) A 60) D 61) A 62) C 63) A

19

CHAPTER 6 TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.

1) A sales order ID is a unique identifier for each purchase order. ⊚ true ⊚ false

2) A business unit code is used to identify the business unit, region, and branch at the level that financial statements are being reconciled. ⊚ true ⊚ false

3) A customer account ID identifies the customer from whom payment is expected or to whom unused credits have been applied. ⊚ true ⊚ false

4) Descriptive analytics summarize activity or master data elements based on certain attributes. ⊚ true ⊚ false

5) The auditor may select a sample of new customer accounts to verify that they were opened the appropriate documentation exists. ⊚ true ⊚ false

6) 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. ⊚ ⊚

7)

true false

An auditor will perform predictive analytics before diagnostic analytics.

1

⊚ ⊚

true false

8) Prescriptive analytics identify a course of action for the auditor to take based on the actions taken in similar situations in the past. ⊚ true ⊚ false

9) Sampling is useful when you have manual audit procedures, such as testing transaction details or evaluating source documents. ⊚ true ⊚ false

10)

Monetary unit sampling allows auditors to mitigate risk. ⊚ true ⊚ false

11)

Benford’s Law predicts the distribution of first digits. ⊚ true ⊚ false

12) Exact matching is a way in which auditors join database tables with a foreign key from one table to the secondary key of another. ⊚ true ⊚ false

13) Sequence checks are useful for finding gaps in items that should be sequential in nature (i.e., check number) or for finding duplicate values for items that should be unique in nature (i.e., duplicate payments to vendors). ⊚ ⊚

true false

2

14) Regression allows an auditor to predict a specific dependent value based on independent variable inputs. ⊚ true ⊚ false

15)

Classification in auditing is typically focused on risk assessment. ⊚ true ⊚ false

16) Sorting in descending order shows the smallest number values first. Sorting in ascending order shows the largest values first. ⊚ true ⊚ false

17) Summary statistics provide insight into the relative size of a number compared with the population. ⊚ true ⊚ false

18)

A fuzzy match is based on the similarity of the values. ⊚ true ⊚ false

19) Artificial intelligence is designed around the idea that computers can learn about action or behavior from the past and predict the course of action for the present. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.

20) Which of the following statements is true?

3

A) Monetary unit sampling more likely to pull accounts with small balances.

B) Monetary unit sampling allows auditors to evaluate account balances.

C) Prescriptive analytics attempt to find hidden patterns or variables.

D) Predictive analytics use machine learning and artificial intelligence.

21)

Which of the following statements is false?

A) Predictive analytics attempt to find hidden patterns or variables.

B) Regression allows an auditor to predict a specific dependent value based on independent variable inputs.

C) Classification in auditing is mainly focused on risk assessment.

D) Monetary unit sampling more likely to pull accounts with small balances.

22)

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.

23)

Which of the following is the best choice as the unique identifier for each sales order?

A) Item# B) Shipping# C) Purchase_Order# D) Sales_Order#

24)

Which of the following is an example of descriptive analytics?

4

A) Summary statistics B) Z-score C) Similarity matching D) Fuzzy matching

25)

Which of the following is not an example of descriptive analytics?

A) Drill-down B) Age analysis C) Sampling D) Sorting

26)

Which of the following is an example of predictive analytics?

A) Classification B) Z-score C) Decision support systems D) Diagnostic

27)

Which of the following is not an example of predictive analytics?

A) Classification B) Regression C) Probability D) Artificial intelligence

28) Which type of audit analytics might be used to summarize activity or master data based on certain attributes?

5

A) Prescriptive analytics B) Predictive analytics C) Diagnostic analytics D) Descriptive analytics

29) Which type of audit analytics might be used to detect correlations and patterns of interest?

A) Prescriptive analytics B) Predictive analytics C) Diagnostic analytics D) Descriptive analytics

30) Which type of audit analytics might be used to identify common attributes or patterns that may be used to identify similar activity?

A) Prescriptive analytics B) Predictive analytics C) Diagnostic analytics D) Descriptive analytics

31) Which type of audit analytics might be used to recommend action based on previously observed actions?

A) Prescriptive analytics B) Predictive analytics C) Diagnostic analytics D) Descriptive analytics

32) Grouping balances by date is referred to as descriptive analytics.

blank and is an example of

6

A) summary statistics B) age analysis C) monetary unit sampling D) sorting

33) Identify largest or smallest values is referred to as descriptive analytics.

blank and is an example of

A) summary statistics B) age analysis C) monetary unit sampling D) sorting

34) What computer-assisted audit technique allows auditors to evaluate account balances and is an example of descriptive analytics?

A) Summary statistics B) Monetary unit sampling C) Sorting D) Random sampling

35) Assigning a value to a number based on how many standard deviations it stands from its mean is called blank.

A) A Z-score B) a T-test C) regression analysis D) classification analysis

36)

Exploring the details behind the values is referred to as

blank.

7

A) regression analysis B) clustering C) drill-down D) classification analysis

37) The identification of transactions or users with non-typical activity based on the distribution of first digits and is called:

A) a drill-down.

B) fraud detection.

C) Benford’s Law. D) monetary unit sampling.

38)

Detecting gaps in records and duplicate entries is referred to as

blank.

A) sequence check B) stratification C) gap analysis D) Benford’s law

39)

Grouping records by non-obvious similarities is referred to as

blank.

A) clustering B) regression C) classification D) stratification

40) as

Predicting specific dependent values based on independent variable inputs is referred to blank.

8

A) correlation B) regression C) classification D) time series

41) Using a rank score to evaluate the strength of classification is referred to as probability and is an example of blank analytics.

A) diagnostic B) descriptive C) prescriptive D) predictive

42) Evaluating the tone of text to forecast an outcome is referred to as sentiment analysis and is an example of blank analytics.

A) diagnostic B) descriptive C) prescriptive D) predictive

43) An example of predictive analytics that uses observations of behavior or past actions to predict the course of action for the future is referred to as: A) artificial intelligence B) regression C) classification D) what-if analysis

44)

Which of the following z-scores is likely an outlier that warrants further scrutiny?

9

A) −2.1 B) 0.0 C) 1.75 D) 3.2

45) Which testing approach is useful to determine procedures to follow when new credit accounts are opened for inactive customers?

A) Applied statistics B) Regression C) Fuzzy matching D) Classification

46) Large training sets are needed to generate relatively accurate models when using which type of approach?

A) Descriptive B) Regression C) Classification D) Diagnostic

47)

Which of the following is an example of a decision support system?

A) IDEA B) MS Excel C) TurboTax D) TeamMate Analytics

48)

Benford’s Law states that:

10

A) common tables and fields are needed by auditors to perform common audit tasks.

B) analytics must be used to looks for correlations or patterns of interest in the data.

C) the number of transistors in a dense integrated circuit doubles approximately every two years.

D) in naturally occurring collections of numbers, the leading significant digit is likely to follow a theoretical distribution.

49) 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

50)

The objectives of the audit and outputs generated by the business processes reflect the blank of the audit.

A) nature B) extent C) timing D) analysis

51)

The prevalence of data has expanded the

blank of the audit.

A) nature B) extent C) timing D) analysis

11

52) Analytics run on a schedule at certain points in the audit reflects the the audit.

blank of

A) nature B) extent C) timing D) analysis

53)

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

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

54) Identify three different descriptive analytics that are used in an audit setting and describe how they can help decision makers.

55) Identify three different diagnostic analytics that are used in an audit setting and describe how they can help decision makers.

12

Answer Key Test name: Chap 06_3e_Richardson 1) FALSE 2) FALSE 3) TRUE 4) TRUE 5) TRUE 6) FALSE 7) FALSE 8) TRUE 9) TRUE 10) FALSE 11) TRUE 12) FALSE 13) TRUE 14) TRUE 15) TRUE 16) FALSE 17) TRUE 18) TRUE 19) FALSE 20) B 21) D 22) D 23) D 24) A 25) A 26) A 13

27) D 28) D 29) C 30) B 31) A 32) B 33) D 34) B 35) A 36) C 37) C 38) A 39) A 40) B 41) D 42) D 43) A 44) D 45) A 46) C 47) C 48) D 49) C 50) A 51) B 52) C 53) D

14

54) Age analysis helps determine how old account balances are and places them in buckets. This analysis can help decision makers determine the likelihood that a balance will be paid.

Sorting reorders data from largest to smallest, smallest to largest, or alphabetical order. This can be used to find high dollar transactions or high-volume items.

Summary statistics provide insight into a population by calculating the minimum, maximum, average, median, count, and sum. Decision makers use summary statistics to better understand the scope of the data and gather insights into what behavior is common among the majority of the data.

Sampling is useful for limiting the size of observations where manual review is needed. Decision makers can select different sampling techniques to test those transactions and generalize the audit to the rest of the population.

15

55) Z-score is a statistical concept that is used to identify outliers. It helps decision makers identify unlikely and risky individuals and transactions.

Benford’s Law shows the distribution of first digits in a large set of numbers. This can be used to identify individuals that are generating an abnormal number of high-value transactions or if many individuals are trying to circumvent approval limit controls.

Drill-down is used to discover the underlying values that make up summary or aggregate values. Decision makers use drill-down to determine transactions or individuals that are causing deviations from normal activity.

Matching shows values that are the same or similar in the case of fuzzy matching. These can validate internal controls, for example, by matching invoices and payments. They can also identify risk, for example, where vendors and employees may be related.

Sequence check validates data completeness by identifying any gaps in a sequence of numbers. Managers can use this to detect missing or duplicate transactions.

Stratification and Clustering group individuals with like attributes.

This helps decision makers identify target groups of people or transactions where they can focus operational effort.

16

CHAPTER 7 TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.

1) Data analytics is the process of measuring past performance while comparing it to targeted goals to better evaluate a company's progress. ⊚ true ⊚ false

2)

Performance metrics can be used to determine competence. ⊚ true ⊚ false

3) Data analytics enhances a business's ability to determine gaps in actual company performance and even the potential to transform the manner in which a company runs their business. ⊚ true ⊚ false

4)

Data visualization is an effective way to communicate the result of any data analysis. ⊚ true ⊚ false

5)

A digital dashboard allows for communicating a selection of KPIs. ⊚ true ⊚ false

6)

The balanced scorecard is based around a company's profit and loss statement. ⊚ true ⊚ false

7) The value of a digital dashboard is maximized when the metrics provided are used to impact decision-making and action. ⊚ true ⊚ false

1

8) The balanced scorecard helps companies turn their strategic goals into action by identifying the most important metrics to measure. ⊚ true ⊚ false

9) The balanced scorecard is comprised of four components: financial, customer, internal process and organizational validity. ⊚ true ⊚ false

10)

Financial performance KPIs include net profit, net profit margin, and gross profit margin. ⊚ true ⊚ false

11) Customer KPIs include price earnings ratio, net promoter score, and customer retention score. ⊚ true ⊚ false

12)

Operational KPIs include six sigma level and first contact resolution. ⊚ true ⊚ false

13) Employee Performance KPIs include staff advocacy score and overall equipment effectiveness. ⊚ true ⊚ false

14) Environmental and social sustainability KPIs include energy consumption and carbon footprint. ⊚ true ⊚ false

2

15) A balanced scorecard includes a well-defined mission, vision and set of values which are integral in creating and maintaining a successful culture. ⊚ true ⊚ false

16) A proper strategy for a company’s growth considers what a firm does well and how it achieves it. ⊚ true ⊚ false

17) 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. ⊚ true ⊚ false

18) Since KPI dashboards are usually monitored on a daily basis, the importance of communication between all users is trivial. ⊚ true ⊚ false

19) The IMPACT model should be used to complete a project using a balanced scorecard or some other type of digital dashboard to highlight metrics and KPIs. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.

20) The calculation measuring how an organization is performing, particularly when that measure is compared to a baseline, is called a:

3

A) balanced scorecard.

B) digital dashboard.

C) key performance indicator.

D) performance metric.

21) A particular type of metric that an organization deems the most important and influential on decision-making is known as a: A) balanced scorecard.

B) digital dashboard.

C) key performance indicator.

D) performance metric.

22) A 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 is called a: A) balanced scorecard.

B) digital dashboard.

C) key performance indicator.

D) performance metric.

23) An interactive report showing the most important metrics to help users understand how a company or an organization is performing is called a: A) balanced scorecard.

B) digital dashboard.

C) key performance indicator.

D) performance metric.

24) The balanced scorecard is comprised of four components; which of the following is not an item that should be identified for each component?

4

A) objectives B) measures C) destinations D) initiatives

25) The balanced scorecard is comprised of four components, which of the following is not a component of a balanced scorecard?

A) Financial B) Customer C) Internal process D) External process

26)

Market share is which of the following types of KPI? A) Marketing B) Customer C) Operational D) Financial performance

27)

Market growth rate is which of the following types of KPI? A) Marketing B) Customer C) Operational D) Financial performance

28)

Social networking footprint is which of the following types of KPI?

5

A) Marketing B) Operational C) Customer D) Financial performance

29)

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

30)

Staff advocacy score is which of the following types of KPI? A) Employee performance B) Operational C) Customer D) Financial performance

31)

Revenue per employee is which of the following types of KPI? A) Employee performance B) Operational C) Customer D) Financial performance

32)

EBITDA is which of the following types of KPI? A) Employee performance B) Operational C) Marketing D) Financial performance

6

33)

Operating profit margin is which of the following types of KPI? A) Employee performance B) Operational C) Marketing D) Financial performance

34)

Return on investment is which of the following types of KPI? A) Employee performance B) Operational C) Marketing D) Financial performance

35)

Operating expense ratio is which of the following types of KPI? A) Employee performance B) Operational C) Marketing D) Financial performance

36)

Customer turnover rate is which of the following types of KPI? A) Employee performance B) Operational C) Customer D) Financial performance

37)

Customer retention rate is which of the following types of KPI?

7

A) Employee performance B) Operational C) Customer D) Financial performance

38)

Inventory shrinkage rate is which of the following types of KPI? A) Employee performance B) Operational C) Customer D) Financial performance

39)

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

40)

First pass yield is which of the following types of KPI? A) Employee performance B) Operational C) Customer D) Financial performance

41)

Process downtime level is which of the following types of KPI? A) Employee performance B) Operational C) Customer D) Financial performance

8

42)

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

43)

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

44) Which of the following is an example of an environmental and social performance sustainability KPI? A) 360-degree feedback score B) Process waste level C) Conversion rate D) Supply chain miles

45)

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

46)

Which of the following is an example of an operational KPI?

9

A) CAPEX to sales ratio B) Absenteeism Bradford factor C) Overall equipment effectiveness D) Product recycling rate

47)

Which of the following is an example of a marketing KPI? A) Customer lifetime value B) Quality index C) Page views and bounce rate D) Time to market

48)

Which of the following is an example of a customer KPI? A) Customer online engagement level B) Capacity utilization rate C) Cost per lead D) Net promoter score

49)

Which of the following is an example of a financial performance KPI? A) Economic value added B) Brand equity C) Klout score D) Earned value (EV) metric

50) In a balanced scorecard, what are the actions that an organization can take to move its specified metrics in the direction of their stated target goal?

10

A) Objectives B) Initiatives C) Measures D) Targets

51)

In a balanced scorecard, what should be aligned with strategic goals of the organization?

A) Objectives B) Initiatives C) Measures D) Targets

52) In a balanced scorecard, what should be achievable goals toward which to move the metric?

A) Objectives B) Initiatives C) Measures D) Targets

53) What type of analysis is used to determine the fixed and variable components of mixed costs?

A) Correlation analysis B) Benfords’ Law C) Crosstabulation analysis D) Regression analysis

54) What type of analytics would be used to predict future sales for decision-making purposes?

11

A) Descriptive B) Diagnostic C) Predictive D) Prescriptive

55) What type of analytics would be used to assess the difference between budgeted and actual performance?

A) Descriptive B) Diagnostic C) Predictive D) Prescriptive

56) of

An analysis of favorable and unfavorable price variances would be an example blank analytics.

A) descriptive B) diagnostic C) predictive D) prescriptive

57)

Digital dashboards would be an example of which component of the IMPACT model?

A) Identify the Question B) Address and Refine Results C) Perform Test Plan D) Track Outcomes

58)

Determining the cost of a specific job would be an example of:

12

A) descriptive analytics.

B) diagnostic analytics.

C) predictive analytics.

D) prescriptive analytics.

59)

Sensitivity analysis an example of: A) descriptive analytics.

B) diagnostic analytics.

C) predictive analytics.

D) prescriptive analytics.

60) Analyzing whether a company should manufacture its products or outsource them to a third party is an example of: A) descriptive analytics.

B) diagnostic analytics.

C) predictive analytics.

D) prescriptive analytics.

61) Creating a digital dashboard to present KPIs for decision-making is consistent with which component of the IMPACT model?

A) Communicate insights B) Address and refine results C) Perform the test plan D) Track outcomes

62) An understanding of how frequently the data underlying a balanced scorecard are updated is an important component of which of the following components of the IMPACT model?

13

A) Identify the question B) Master the data C) Perform the test plan D) Address and refine results

63)

Dashboards tend to be monitored on a: A) monthly basis.

B) daily basis.

C) quarterly basis.

D) annual basis.

64)

Dashboards are part of which component of the IMPACT model?

A) Address and Refine Results B) Identify the Question C) Track Outcomes D) Communicate Insights

65) An understanding of how often the data get updated is an important component of which of the 4 V’s?

A) Volume B) Variety C) Velocity D) Veracity

66)

Which of the following is not a software tool used to create dashboards?

14

A) Tableau Prep B) Alteryx C) Excel D) Power BI

15

Answer Key Test name: Chap 07_3e_Richardson 1) TRUE 2) FALSE 3) TRUE 4) TRUE 5) TRUE 6) FALSE 7) TRUE 8) TRUE 9) FALSE 10) TRUE 11) FALSE 12) TRUE 13) FALSE 14) TRUE 15) TRUE 16) TRUE 17) TRUE 18) FALSE 19) TRUE 20) D 21) C 22) A 23) B 24) C 25) D 26) A 16

27) A 28) A 29) A 30) A 31) A 32) D 33) D 34) D 35) D 36) C 37) C 38) B 39) B 40) B 41) B 42) C 43) C 44) D 45) B 46) C 47) C 48) D 49) A 50) B 51) A 52) D 53) D 54) C 55) B 56) B 17

57) D 58) A 59) D 60) D 61) D 62) B 63) B 64) C 65) C 66) A

18

CHAPTER 8 TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.

1) Artificial intelligence, machine learning, and sentiment analysis are three methods used to analyze publicly traded companies on Nasdaq and the NYSE to gain insight and track companies’ business and financial operations. ⊚ true ⊚ false

2)

Data analytics can help predict a company’s revenue, earnings, and cash flow. ⊚ true ⊚ false

3)

XBRL is a global standard for internet communication mostly among day traders. ⊚ true ⊚ false

4) The Securities and Exchange Commission mandates all publicly traded companies file financial statements prepared in accordance with U.S. GAAP. ⊚ true ⊚ false

5)

XBRL stands for eXtensible Business Reporting Linguistic. ⊚ true ⊚ false

6)

The two major types of standardized financial accounting are IFRS and U.S. GAAP. ⊚ true ⊚ false

7) In filing its financial statements with the SEC, a company must tag five basic financial statements, which include a balance sheet, income statement, statement of comprehensive income, statement of cash flows and statement of stockholder’s equity.

1

⊚ ⊚

true false

8) When reporting financial statements, detailed tagging of the numbers included in the footnotes by use of XBRL tags is also required. ⊚ true ⊚ false

9) The XBRL taxonomy helps define and describe each key data element (such as cash or employee spending). ⊚ true ⊚ false

10) The US GAAP Financial Reporting Taxonomy offers over 19,000 unique tags for financial data as part of the taxonomy. ⊚ ⊚

true false

11) The XBRL tag for cash is labeled Cash and is defined as follows: Amount of currency on hand as well as demand deposits with banks or financial institutions. ⊚ true ⊚ false

12) The use of XBRL 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 ⊚ false

13) Sometimes outside data vendors create standardized metrics to make the company reported XBRL data more comparable.

2

⊚ ⊚

true false

14) Many financial reporting systems within enterprise systems have general ledgers that are consistent with XBRL called XBRL-GL. ⊚ true ⊚ false

15) 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 ⊚ false

16) Information such as goodwill or long-term debt will likely change on a minute-by-minute basis in real-time financial reporting. ⊚ true ⊚ false

17) 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. ⊚ true ⊚ false

18)

A major component of financial statement analysis is the use of ratio analysis. ⊚ true ⊚ false

19) Ratio analysis is a tool used to evaluate relationships among different financial statement items to help understand a company’s financial and operating performance. ⊚ true ⊚ false

3

20) There are basically four types of ratios: Liquidity, activity, solvency (or financing) and profitability ratios. ⊚ true ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.

21) XBRL stands for: A) eXtended Business Reporting Language and is a type of HTML. B) eXtended Business Reporting Language and is a type of XML. C) eXtensible Business Reporting Language and is a type of XML. D) eXtensible Business Reporting Language and is a type of HTML.

22)

XBRL is used for reporting financial elements and: A) Tagging B) Composing C) Representing D) Summarizing

23) The Securities and Exchange Commission requires all public company filers to use XBRL tagging in all of the following financial statements except: A) Balance Sheet B) Statement of Comprehensive Income C) Statement of Cash Flows D) Statement of Changes in Working Capital

24)

What does XBRL use to help describe each key data element?

4

A) Taxonomy B) Data dictionary C) Schema D) Terminology

25)

Which of the following is not a type of tagging with XBRL? A) Years B) Figures C) Hieroglyphs D) Text

26)

According to the authors, the use of XBRL tags allows data to be quickly: A) cleaned and prepared.

B) transformed and received.

C) sorted and reconfigured.

D) transmitted and received.

27)

The authors discuss all of the following ways in which tags can serve as an input except: A) regulators seeing if audit firms are in compliance with various regulations and laws.

B) regulators seeing if companies are in compliance with various regulations and laws.

C) financial analysts valuing a company.

D) an auditor finding areas where an error might occur.

28)

Which of the following statements is false?

5

A) Firms can make their own tags if they feel their financial data item does not fit within the existing framework.

B) Sometimes very similar financial data items have unique tags, making direct comparisons between companies difficult.

C) Detailed tagging of the numbers included in the footnotes is required.

D) XBRL uses a taxonomy to help define and describe each key data element, but it is not capable of defining relationships between each element.

29) Using the table below compute profit margin for Q3, 2021 for Coverage Incorporated (Ticker = CD).

Ticke Yea Perio

Revenue

Cost of

Assets

Equity

r

r

d

revenue

CD

202 0

Y

$ 28,899,000,0 00

$ 20,574,000,0 00

$ 40,410,000,0 00

$ 9,800,000,00 0

CD

202 1

Q1

10,059,000,0 00

6,831,000,00 0

42,600,000,0 00

11,279,000,0 00

CD

202 1

Q2

10,493,000,0 00

7,191,000,00 0

47,736,000,0 00

12,502,000,0 00

CD

202 1

Q3

8,303,000,00 0

6,345,000,00 0

47,794,000,0 00

12,024,000,0 00

CD

202 1

Y

34,423,000,0 00

21,264,000,0 00

48,643,000,0 00

9,208,000,00 0

CD

202 2

Q1

10,194,000,0 00

6,816,000,00 0

50,223,000,0 00

10,427,000,0 00

A) 22.0% B) 31.5% C) 30.9% D) 23.6%

30) Using the table below compute operating leverage for Q3, 2021 for Coverage Incorporated (Ticker = CD).

Ticke Yea Perio r

r

d

Revenue

Cost of

Assets

Equity

revenue

6

CD

202 0

Y

$ 28,899,000,0

$ 20,574,000,0

$ 40,410,000,0

$ 9,800,000,00

00

00

00

0

CD

202 1

Q1

10,059,000,0 00

6,831,000,00 0

42,600,000,0 00

11,279,000,0 00

CD

202 1

Q2

10,493,000,0 00

7,191,000,00 0

47,736,000,0 00

12,502,000,0 00

CD

202 1

Q3

8,303,000,00 0

6,345,000,00 0

47,794,000,0 00

12,024,000,0 00

CD

202 1

Y

34,423,000,0 00

21,264,000,0 00

48,643,000,0 00

9,208,000,00 0

CD

202 2

Q1

10,194,000,0 00

6,816,000,00 0

50,223,000,0 00

10,427,000,0 00

A) 13.3% B) 17.4% C) 25.2% D) 52.8%

31) Using the table below compute ROE for Q3, 2021 for Coverage Incorporated (Ticker =CD).

Ticke Yea Perio r CD

r 202 0

d Y

CD

202 1

CD

Revenue

Cost of

Assets

Equity

revenue $ 28,899,000,0 00

$ 20,574,000,0 00

$ 40,410,000,0 00

$ 9,800,000,00 0

Q1

10,059,000,0 00

6,831,000,00 0

42,600,000,0 00

11,279,000,0 00

202 1

Q2

10,493,000,0 00

7,191,000,00 0

47,736,000,0 00

12,502,000,0 00

CD

202 1

Q3

8,303,000,00 0

6,345,000,00 0

47,794,000,0 00

12,024,000,0 00

CD

202 1

Y

34,423,000,0 00

21,264,000,0 00

48,643,000,0 00

9,208,000,00 0

CD

202 2

Q1

10,194,000,0 00

6,816,000,00 0

50,223,000,0 00

10,427,000,0 00

A) 12.4% B) 16.3% C) 21.3% 7

D) 26.6%

8

32) Using the table below compute ROE for 2021 year-end for Coverage Incorporated (Ticker = CD).

Ticke Yea Perio

Revenue

Cost of

Assets

Equity

r

r

d

revenue

CD

202 0

Y

$ 28,899,000,0 00

$ 20,574,000,0 00

$ 40,410,000,0 00

$ 9,800,000,00 0

CD

202 1

Q1

10,059,000,0 00

6,831,000,00 0

42,600,000,0 00

11,279,000,0 00

CD

202 1

Q2

10,493,000,0 00

7,191,000,00 0

47,736,000,0 00

12,502,000,0 00

CD

202 1

Q3

8,303,000,00 0

6,345,000,00 0

47,794,000,0 00

12,024,000,0 00

CD

202 1

Y

34,423,000,0 00

21,264,000,0 00

48,643,000,0 00

9,208,000,00 0

CD

202 2

Q1

10,194,000,0 00

6,816,000,00 0

50,223,000,0 00

10,427,000,0 00

A) 149.2% B) 70.8% C) 84.9% D) 142.9%

33) According to the text, research finds that as the use of negative words in a company’s 10K increases, the stock price is likely to: A) increase.

B) decrease.

C) not be affected.

D) not be determinable.

34)

Sparklines display simple trends and:

9

A) are shown in green or red.

B) show relative importance.

C) are small in size.

D) are large in size.

35)

With regard to sparklines, which of the following statements is false?

A) Sparklines can allow financial statement users to easily see the data visually and give meaning to the underlying financial data.

B) Sparklines can be added to a digital dashboard that already has many charts and dials, without cluttering up the overall appearance of a dashboard.

C) Sparklines can, generally, fit in a single cell within a spreadsheet.

D) Sparklines can easily add to the data without detracting from the tabular results.

36)

A visualization that shows inherent hierarchy is called a: A) heat map.

B) sunburst diagram.

C) tree diagram.

D) pie chart.

37)

A visualization that shows the relative size of values by applying a color scale is called a: A) heat map.

B) sunburst diagram.

C) sparkline.

D) pie chart.

38) A visualization that is used to show trends that replaces or complements lots of numbers is called a:

10

A) heat map.

B) sunburst diagram.

C) sparkline.

D) pie chart.

39)

Liquidity ratios measure a firm’s: A) ability to pay short-term obligations using current assets.

B) operating efficiency.

C) ability to pay their debts and stay in business.

D) ability to generate earnings relative expenses.

40)

Activity ratios measure a firm’s: A) ability to pay short-term obligations using current assets.

B) operating efficiency.

C) ability to pay their debts and stay in business.

D) ability to generate earnings relative to its expenses.

41)

Profitability ratios measure a firm’s: A) ability to pay short-term obligations using current assets.

B) operating efficiency.

C) ability to pay their debts and stay in business.

D) ability to generate earnings relative to its expenses.

42)

Solvency ratios measure a firm’s: A) ability to pay short-term obligations using current assets.

B) operating efficiency.

C) ability to pay their debts and stay in business.

D) ability to generate earnings relative to its expenses.

11

43)

Profit margin is an example of which type of ratio?

A) Solvency ratio B) Profitability ratio C) Liquidity ratio D) Activity ratio

44)

Return on assets is an example of which type of ratio?

A) Solvency ratio B) Profitability ratio C) Liquidity ratio D) Activity ratio

45)

Return on equity is an example of which type of ratio?

A) Solvency ratio B) Profitability ratio C) Liquidity ratio D) Activity ratio

46)

Long-term debt to equity ratios are examples of which type of ratio?

A) Solvency ratio B) Profitability ratio C) Liquidity ratio D) Activity ratio

47)

Debt-to-equity ratio is an example of which type of ratio?

12

A) Solvency ratio B) Profitability ratio C) Liquidity ratio D) Activity ratio

48)

Inventory turnover ratio is an example of which type of ratio?

A) Solvency ratio B) Profitability ratio C) Liquidity ratio D) Activity ratio

49)

Accounts receivable turnover ratio is an example of which type of ratio?

A) Solvency ratio B) Profitability ratio C) Liquidity ratio D) Activity ratio

50)

Total assets turnover ratio is an example of which type of ratio?

A) Solvency ratio B) Profitability ratio C) Liquidity ratio D) Activity ratio

51) The current ratio divides total current assets by total current liabilities and is an example of which type of ratio?

13

A) Solvency ratio B) Profitability ratio C) Liquidity ratio D) Activity ratio

52)

The quick ratio is an example of which type of ratio?

A) Solvency ratio B) Profitability ratio C) Liquidity ratio D) Activity ratio

53)

The acid-test ratio is an example of which type of ratio?

A) Solvency ratio B) Profitability ratio C) Liquidity ratio D) Activity ratio

54)

Sparklines are defined as:

A) a small trendline or graphic that efficiently summarizes numbers of statistics in a graph without axes.

B) a small trendline or graphic that efficiently summarizes numbers of statistics in a graph with axes.

C) a large trendline or graphic that efficiently summarizes numbers of statistics in a graph without axes.

D) a large trendline or graphic that efficiently summarizes numbers of statistics in a graph with axes.

55)

Sparklines are generally shown in:

14

A) several spreadsheet cells.

B) a graphic on a separate worksheet.

C) a single spreadsheet cell.

D) a graphic on the same worksheet, but separable from the numbers underlying it.

56) The method of assessing text sentiment in a block of text that involves counting the number of words of a certain type from a financial dictionary is called: A) the dictionary method.

B) the overlap method.

C) the word count method.

D) the sentiment method.

57) Which of the following is not considered to be a negative word in the financial dictionary?

A) Litigation B) Adverse C) Impairment D) Liability

58) Which of the following is considered to be a negative word in the standard English dictionary, but not a negative word in the financial dictionary?

A) Restructuring B) Claims C) Loss D) Expense

59)

The DuPont method evaluates all of the following ratios as part of its analysis except:

15

A) Liquidity B) Profitability C) Efficiency D) Leverage

60)

According to the text, the XBRL Taxonomy tags unique financial data for about: A) 1,900 elements.

B) 19,000 elements.

C) 190,000 elements.

D) 190 elements.

61)

As opposed to horizontal analysis, vertical analysis:

A) shows the proportional value of accounts to a primary account, like sales revenue on an income statement.

B) shows the change in value of an account from one period to the next.

C) disaggregates return on equity into its component parts.

D) shows the proportionate value of common accounts across companies.

62)

As opposed to vertical analysis, horizontal analysis:

A) shows the proportional value of accounts to a primary account, like sales revenue on an income statement.

B) shows the change in value of an account from one period to the next.

C) disaggregates return on equity into its component parts.

D) shows the proportionate value of common accounts across companies.

63)

Standardized metrics are useful to help XBRL data more comparable because:

16

A) companies use similar XBRL tags for similar accounts.

B) companies use different XBRL tags for similar accounts.

C) companies insist on using XBRL tags that facilitate comparison to their competitors.

D) companies insist on using XBRL tags that do not allow comparison to their competitors.

64)

XBRL-GL is for firms wishing to put tags on accounts within their: A) internal financial reporting system.

B) external financial reporting system.

C) financial statements.

D) footnotes.

65)

Standardized metrics are tags used by the: A) reporting company to allow easier comparison of company reported XBRL data.

B) reporting company to allow easier comparison of company reported non-XBRL data.

C) data vendors to allow easier comparison of company reported XBRL data.

D) data vendors to allow easier comparison of company reported non-XBRL data.

17

Answer Key Test name: Chap 08_3e_Richardson 1) TRUE 2) TRUE 3) FALSE 4) TRUE 5) FALSE 6) TRUE 7) TRUE 8) TRUE 9) FALSE 10) TRUE 11) TRUE 12) FALSE 13) TRUE 14) TRUE 15) FALSE 16) FALSE 17) TRUE 18) TRUE 19) TRUE 20) TRUE 21) C 22) A 23) D 24) A 25) C 26) D 18

27) A 28) D 29) D 30) B 31) B 32) D 33) B 34) C 35) B 36) B 37) A 38) C 39) A 40) B 41) D 42) C 43) B 44) B 45) B 46) A 47) A 48) D 49) D 50) D 51) C 52) C 53) C 54) A 55) C 56) B 19

57) D 58) D 59) A 60) B 61) A 62) B 63) A 64) A 65) C

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CHAPTER 9 TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.

1) The tax function has its own reporting system, separate from the financial reporting system. ⊚ true ⊚ false

2)

Frequency and magnitude of tax audit adjustments are an example of tax risk KPIs. ⊚ true ⊚ false

3)

The effective tax rate over time is an example of tax cost KPIs. ⊚ true ⊚ false

4)

The overall goal of a company’s tax function is to maximize taxable income. ⊚ true ⊚ false

5) One way for tax regulators to assess if companies are paying sufficient tax is to look at the differences between the amount of income reported for financial reporting purposes and the amount of taxable income reported to the IRS. ⊚ true ⊚ false

6) According to the text, the IRS mines and monitors personal data from social media (such as Facebook, Twitter, Instagram, etc.)1 about taxpayers. ⊚ true ⊚ false

7) According to the text, analytics can be used to find supporting evidence for an R&D tax credit.

1

⊚ ⊚

true false

8) According to the text, the IRS uses an algorithm called Tax Profiling Algorithm that pulls historical data for average amount and type of deductions related to income level and predicts the likelihood of underreported income. ⊚ true ⊚ false

9) Dashboards allow tax departments to evaluate those jurisdictions where current state income tax liabilities have departed most from the liability of prior years. ⊚ true ⊚ false

10)

What-if scenario analysis tests the impact of various output data on an expected input. ⊚ true ⊚ false

11) The effect of tax loss carry-forwards are examples of tax efficiency and effectiveness KPIs. ⊚ true ⊚ false

12)

Companies might engage in data analytics to help avoid a tax audit. ⊚ true ⊚ false

13)

Companies might engage in data analytics “to see what the regulator is seeing”. ⊚ true ⊚ false

14) An analysis of why a company pays a higher effective tax rate than its industry would be an example of diagnostic analytics.

2

⊚ ⊚

true false

15) One of the potential analyses performed using data analytics would be calculating and documenting book-tax differences. ⊚ true ⊚ false

16) Tax software and analytics (such as Hyperion or Corptax) is used to help with the reconciliation to find both permanent and temporary differences between the two methods of computing income and also to provide needed support for IRS schedule M-3. ⊚ true ⊚ false

17) Tax departments are able to specify what data might affect their tax calculations for their tax data mart but not involve a continuous feed of that data. ⊚ true ⊚ false

18) 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 ⊚ false

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.

19) A data warehouse is data kept for more general purposes, but a blank is kept for more specific purposes.

A) data mart B) data store C) database D) data dump

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20) What is defined as the analysis of potential tax liability and formulation of a plan to reduce the amount of taxes paid?

A) What-if scenario tax analysis B) Tax planning C) Tax compliance D) Tax contingency planning

21) The IRS uses an algorithm called the blank that pulls historical data for average amount and type of deductions related to income level and predicts the likelihood of underreported income.

A) Discriminant Function Algorithm B) Profiling Algorithm C) Underreporting Algorithm D) Tax Evaders Algorithm

22) 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.

23)

Levels of technology/tax training would be an example of which kind of KPI? A) Tax cost B) Tax risk C) Tax efficiency and effectiveness D) Tax sustainability

24)

Effect of loss carry-forwards would be an example of which kind of KPI?

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A) Tax cost B) Tax risk C) Tax efficiency and effectiveness D) Tax sustainability

25)

Level of job satisfaction of the tax personnel would be an example of which kind of KPI? A) Tax cost B) Tax risk C) Tax efficiency and effectiveness D) Tax sustainability

26) What is used to extract past and real-time data from the financial reporting system that is most applicable to the tax function?

A) Tax data warehouse B) Tax data mart C) Tax data store D) Tax database

27) The 2018 Tax Cuts and Jobs Act Tax Reform provided tax benefits for real estate investments in: A) opportunity zones.

B) tax-free zones.

C) tax-incentive zones.

D) real estate tax zones.

28)

All of the following are included in a company's data warehouse except:

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A) Enterprise data B) Reporting data C) Tax tables D) Tax KPIs

29) The IRS has direct access to all but the following data that is used to evaluate the possibility of tax evasion: A) schedule K-1’s.

B) credit risk scores.

C) form 1099.

D) form 18-C.

30)

Data analytics is used to qualify for R&D tax credits by: A) using data analytics to provide supporting documentation of R&D expenditures made.

B) including the cost to perform data analytics as qualifying R&D expenditures.

C) using data analytics to find additional qualifying R&D expenditures.

D) evaluating whether existing R&D expenditures qualify for tax credit.

31) According to the text, which of the following questions would not be involved with tax planning?

A) What will be the impact of a new tax rate on our tax liability?

B) Are we minimizing our tax burden by tracking all eligible deductible expenses and transactions that qualify for tax credits?

C) What would be the impact of relocating our headquarters to a different city, state or country?

D) How to minimize taxes on the tax return on the fiscal year just ended?

32) Which type of tax analytics provide insight by creating a trend analysis for sales and use tax paid in different locations, which would help identify seasonal patterns or abnormal transaction volume that warrant further investigation?

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A) Descriptive analytics B) Diagnostic analytics C) Predictive analytics D) Prescriptive analytics

33) A reconciliation that finds the difference between taxable income and financial income would be an example of: A) descriptive analytics.

B) diagnostic analytics.

C) predictive analytics.

D) prescriptive analytics.

34)

Which type of tax analytics uses historical data to identify future tax liabilities?

A) Descriptive analytics B) Diagnostic analytics C) Predictive analytics D) Prescriptive analytics

35) Tax planning to minimize the payment of taxes paid by a company is an example of which type of tax analytics?

A) Descriptive analytics B) Diagnostic analytics C) Predictive analytics D) Prescriptive analytics

36) Which type of tax analytics provide insight into the current processes, policies, and calculations related to determining tax liability?

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A) Descriptive analytics B) Diagnostic analytics C) Predictive analytics D) Prescriptive analytics

37) Which type of tax analytics summarizing transactions by jurisdiction or category to more accurately calculate tax liability?

A) Descriptive analytics B) Diagnostic analytics C) Predictive analytics D) Prescriptive analytics

38) 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

39) Which type of tax analytics uses ancillary data, including growth rates, trends, and other identified patterns, aids in the usefulness of regression and what-if analyses?

A) Descriptive analytics B) Diagnostic analytics C) Predictive analytics D) Prescriptive analytics

40)

Which type of tax analysis tests the impact of various input data on an expected output?

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A) What-if Scenario Analysis B) Goal Seek Analysis C) Cash Flow Analysis D) What-if Case Analysis

41) To plan for the impact on taxes of the recent change in accounting for research and experimental expenditures, analysts may use which of the following types of prescriptive analytics?

A) What-if Scenario Analysis B) Goal Seek Analysis C) Regression Analysis D) What-if Case Analysis

42) Determining the appropriate structure of a merger and/or acquisition transaction that would give the greatest tax advantage would be an example of: A) descriptive analytics.

B) diagnostic analytics.

C) predictive analytics.

D) prescriptive analytics.

43)

The effective tax rate over time would be an example of which kind of KPI? A) Tax cost B) Tax risk C) Tax efficiency and effectiveness D) Tax sustainability

44) The amount of time spent on compliance versus strategic activities would be an example of which kind of KPI?

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A) Tax cost B) Tax risk C) Tax efficiency and effectiveness D) Tax sustainability

45) Number of tax audits closed and significance of assessment would be an example of which kind of KPI? A) Tax cost B) Tax risk C) Tax efficiency and effectiveness D) Tax sustainability

46) Tax-focused KPIs appear on dashboards or cockpits, consistent with which components of the IMPACT model?

A) Identify the Question B) Master the Data C) Perform the Text D) Communicate Insights

47) Tax sustainability KPIs appear on dashboards or cockpits, consistent with which components of the IMPACT model?

A) Tracking Outcomes B) Identify the Question C) Master the Data D) Communicate Insights

48) Querying the tax data mart would be consistent with which components of the IMPACT model?

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A) Tracking Outcomes B) Perform the Analysis C) Identify the Question D) Communicate Insights

49) Performing regressions using data from the tax data mart would be consistent with which components of the IMPACT model?

A) Tracking Outcomes B) Perform the Analysis C) Master the Data D) Communicate Insights

50) The change in US tax code, requiring companies to capitalize R&E expenditures, is expected to have what effect on taxable income and corresponding tax liability?

A) Have uncertain impact on taxable income and corresponding tax liability B) Increase taxable income and corresponding tax liability C) Decrease taxable income and corresponding tax liability D) Have no impact on taxable income and corresponding tax liability

51) According to the text, all but which of the following data marts come from a companywide data warehouse?

A) Financial data mart B) Tax data mart C) Marketing data mart D) Compensation data mart

52) The frequency of concerns pertaining to the organization’s tax position is an example of which kind of KPI?

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A) Tax cost B) Tax risk C) Tax efficiency and effectiveness D) Tax sustainability

53) Potential items that comprise permanent differences between book and tax income include all but the following: A) Penalties and fines (excluded from taxable income).

B) Meals and entertainment (100 percent books, 50 percent tax).

C) Dividends received deduction (taxed based on percentage of ownership).

D) R&D expense

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Answer Key Test name: Chap 09_3e_Richardson 1) FALSE 2) TRUE 3) FALSE 4) FALSE 5) TRUE 6) TRUE 7) TRUE 8) FALSE 9) TRUE 10) FALSE 11) FALSE 12) TRUE 13) TRUE 14) TRUE 15) TRUE 16) TRUE 17) FALSE 18) TRUE 19) A 20) B 21) A 22) A 23) C 24) A 25) C 26) B 13

27) A 28) D 29) D 30) A 31) D 32) B 33) B 34) C 35) D 36) A 37) A 38) B 39) C 40) A 41) A 42) D 43) D 44) C 45) D 46) D 47) A 48) A 49) B 50) B 51) D 52) B 53) D

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