ACCT 4301 Exam 2 Questions and Verified Answers

Data Analytics and Analytical Procedures What is data analytics "Process of gathering and analyzing data and then using the results to make better decisions" What are the common 4 types of data analytics? Descriptive Analytics - reporting of past events to characterize what has happened Example: Analysis of accounts receivable to identify all cash receipts from last week; analysis of cash collections for the past five years Diagnostic Analytics - provides insight about trends - cutting data in different ways for additional insight (e.g., by regions, customer, product lines, etc.) Example: Analysis of cash receipts from customers in the past week indicate that customers from the southwest region submitted 50% of total cash receipts Predictive Analytics - extract information, apply assumptions, and draw correlations to predict future outcome and trends Example: Analysis of cash receipts from customers across numerous traits (regions, payment history, average amount owed, size of orders, etc.) indicate that payment history and average amount owed are most attributable to predicting future payments. Prescriptive Analytics - analysis that tests various scenarios to evaluate which course of action would lead to the best potential outcome and/or predictions Example: sensitivity analysis of different discount rates the company uses to derive its FV estimate of one of its significant investments How does data analytics relate to financial statement audits and analytical procedures? Data analytics can be used by consultants, tax professionals, internal auditors, management, and external auditors to name a few. Analytical procedures performed by external auditors is essentially a form of data analytics. It is absolutely imperative that you develop skills to interpret data and detect patterns that are consistent as well as inconsistent with expectations. Key Financial Ratios