The Audit Analytics Process Flashcards

An auditor is using data analytics to examine a full year of sales transactions for a large retail company. The primary objective is to identify any sales transactions that were recorded on a public holiday when all stores were officially closed. Which step of the audit analytics process does this specific activity represent?

Answer: Performing the audit data analytic

This activity is the core execution of the planned test. The auditor has already planned what to look for and has prepared the data. Now, they are running the analysis to filter and identify the specific transactions that meet the defined criteria (sales on a public holiday).

During the planning phase of an audit data analytic (ADA), which of the following is the MOST crucial consideration for the audit team?

Answer: Defining the specific audit objective and the population of data to be analyzed.

The first and most critical step in planning an ADA is to clearly define its purpose and scope. This involves identifying the specific audit objective (e.g., testing for duplicate payments) and determining the relevant data population (e.g., all vendor payments for the fiscal year). All other steps follow from this fundamental decision.

An internal auditor is analyzing expense reports for a company. They run an analysis that summarizes total expenses by employee and then compares each employee's total to the department average, flagging individuals with significantly higher totals. This type of analysis is best described as:

Answer: Descriptive Analytics

Descriptive analytics focuses on summarizing historical data to understand what has happened. By summarizing totals and comparing them to an average, the auditor is describing the characteristics of the expense data to identify anomalies, which is a key application of descriptive analytics.

Which of the following scenarios BEST illustrates the 'Access and Prepare the Data' step in the audit analytics process?

Answer: An auditor extracts a raw data file of employee overtime hours and transforms the date fields into a consistent YYYY-MM-DD format for usability in the analytics tool.

The 'Access and Prepare the Data' step involves obtaining the raw data and then cleaning, transforming, and structuring it for analysis. Converting date fields into a standard format (a process known as data transformation or cleansing) is a classic example of preparing the data for the analytic tool.

After performing an audit data analytic to detect duplicate invoice payments, the auditor identifies 50 potential duplicates. What is the most appropriate next step in the audit analytics process?

Answer: Plan and perform additional procedures to validate the findings and understand the root cause.

The output of an ADA is not the final conclusion. The identified exceptions or anomalies require further investigation. The auditor must plan and perform additional audit procedures to corroborate the findings, determine if they are actual misstatements, and understand why they occurred before drawing a conclusion.

When considering the relevance and reliability of data to be used in an audit data analytic, an auditor should prioritize which of the following activities?

Answer: Gaining an understanding of the source, system controls, and how the data was generated.

According to auditing standards and best practices, understanding the source of the data and the controls surrounding its creation and maintenance is fundamental to assessing its reliability. Without reliable data, the results of any analytic are questionable. This step is crucial for placing reliance on the evidence generated from the ADA.