Data Analytics For Accounting
19th Edition
ISBN: 9781260375183
Author: RICHARDSON
Publisher: MCG
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Question
Chapter 1, Problem 10DQ
To determine
Provide an example of why focusing on a portion of the total number of transactions might be important for auditors to assess risk.
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What challenges do auditors face when using big data, data analytics and new technologies during an audit?
ased on an assessment of audit risk, the auditors are concerned with the following two risks:
The risk that that the client might be making duplicate payments to vendors.
The risk that the client’s accounting clerk might be making unauthorized payments to himself.
Required:
a. Assuming that the client has a manual accounting system, describe how the auditors can design a test to identify the duplicate payments and unauthorized payments.
b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments.
b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments.
Based on an assessment of audit risk, the auditors are concerned with the following two risks:
The risk that that the client might be making duplicate payments to vendors.
The risk that the client’s accounting clerk might be making unauthorized payments to himself.
Required:
a. Assuming that the client has a manual accounting system, describe how the auditors can design a test to identify the duplicate payments and unauthorized payments.
b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments.
c. Describe the advantages of using data analytics software to identify unusual transactions or entries.
Chapter 1 Solutions
Data Analytics For Accounting
Ch. 1 - Prob. 1MCQCh. 1 - Prob. 2MCQCh. 1 - Prob. 3MCQCh. 1 - Prob. 4MCQCh. 1 - Prob. 5MCQCh. 1 - Prob. 6MCQCh. 1 - Prob. 7MCQCh. 1 - Prob. 8MCQCh. 1 - Prob. 9MCQCh. 1 - Prob. 10MCQ
Ch. 1 - Prob. 1DQCh. 1 - Give an example of how Data Analytics creates...Ch. 1 - Prob. 3DQCh. 1 - Prob. 4DQCh. 1 - Prob. 5DQCh. 1 - Prob. 6DQCh. 1 - Prob. 7DQCh. 1 - Prob. 8DQCh. 1 - Prob. 9DQCh. 1 - Prob. 10DQCh. 1 - Prob. 11DQCh. 1 - Prob. 12DQCh. 1 - To address the question Will I receive a loan from...Ch. 1 - Download and consider the data dictionary file...Ch. 1 - Download and consider the rejected loans dataset...Ch. 1 - Prob. 3PCh. 1 - Prob. 4PCh. 1 - Consider the 2013 declined loan data from...Ch. 1 - Consider the 2013 declined loan data from...
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Similar questions
- Explain why auditing is important in lowering the risk associated with information.arrow_forwardIn which of the following circumstances would an auditor expect to find that an entity had implemented automated controls to reduce risks of misstatement?a. When errors are difficult to predict.b. When misstatements are difficult to define.c. When large, unusual, or nonrecurring transactions require judgment.d. When transactions are high volume and recurring.arrow_forwardAn internal auditor is examining the effectiveness of procedures management established to protect customer data from cyberattacks and whether those procedures are cost effective. This is an example of an operational audit. Question options: True Falsearrow_forward
- An auditor would be most likely to assess control risk at the maximum level in an electronic environment with automated system-generated information when:Select one: a. Fixed asset transactions are few in number, but large in dollar amount. b. Payables are based on many transactions and large in dollar amount. c. Accounts receivable records are based on many transactions and are large in dollar amount. d. Sales orders are initiated using predetermined, automated decision rules.arrow_forwardA primary advantage of using generalized audit software packages to audit the financial statements of a client that uses a computer system is that the auditor may: a.Access information stored on computer files while having a limited understanding of the client’s hardware and software features. b.Consider increasing the use of substantive tests of transactions in place of analytical procedures. c.Substantiate the accuracy of data through selfchecking digits and hash totals. d.Reduce the level of required tests of controls to a relatively small amount.arrow_forwardGenerally, which of the following audit procedures is the least expensive to perform? A. Analytical procedures B. Tests of details of balance C. Substantive tests of transactions D. Tests of controls E. Risk assessment proceduresarrow_forward
- Generally, which of the following audit procedures is the least expensive to perform? A. Analytical procedures B. Tests of details of balance C. Substantive tests of transactions D. Tests of controls E. Risk assessment procedurearrow_forwardAttribute sampling enables the auditor to directly assess whether a rule is operating successfully or not, sampling is more reliable for assessing controls. This is crucial in circumstances where data accuracy or completeness are essential, such as when a credit-check control is used for consumer orders. The focus is on estimating the overall monetary value of a population, therefore monetary-unit sampling is more suitable for verifying the accuracy of financial statements or specific account balances. It is crucial to remember that the exact audit objectives and the type of data being checked will determine the sampling technique that is used. Do you believe monteray unit sampling can do the same thing?arrow_forwardExplain the importance of auditing in reducing information risk.arrow_forward
- Which of the following is appropriate about risk assessment? A. The assessed level of inherent and control risk can be sufficiently low, thus resulting to eliminating the need for substantive tests. B. Audit risk may be more effectively determined by assessing inherent and control risk separately. C. Detection risk is eliminated if an auditor were to examine 100 percent off the account balance or class of transactions. D. There is an iverse relationship between detection risk and the combined level of inherent and control riskarrow_forwardWhen using test data, why are audit teams required to prepare only one transaction to test each IT control?a. The speed and efficiency of the computer results in reduced sample sizes.b. The risk of misstatement is typically lower in an IT environment.c. Audit teams generally perform more extensive substantive testing in an IT environment, resulting in less need to test processing controls.d. In an IT environment, each transaction is handled in an identical manner.arrow_forwardWhat is meant by data mining, and why must technical analysts be careful not to engage in it?arrow_forward
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