Data Analytics in Auditing and Taxation

A set of flashcards focusing on vocabulary and key concepts related to data analytics, auditing, and taxation.

Monetary Unit Sampling (MUS)

Allows auditors to evaluate account balances.

Descriptive Analytics

Summarizes activity or master data on specific attributes, useful for sorting and summarizing data to create a baseline for advanced analytics.

Age Analysis

Determines the likelihood of payment by grouping balances by date, identifying exceptionally old accounts for auditor review.

Sorting

Identifies largest or smallest values, presenting them in ascending or descending order to provide meaningful insights.

Summary Statistics

Includes mean, median, min, max, count, and sum; used to identify the relative size of values within a population.

Predictive Analytics

Helps auditors discover hidden patterns linked to abnormal behavior by predicting outcomes based on historical data.

Regression

A predictive analytics method that predicts specific dependent values based on independent variable inputs.

Sentiment Analysis

Evaluates text for positive or negative sentiment to predict outcomes, often applied to financial statements.

Key Performance Indicators (KPI)

Specific performance metrics used to measure how well a company is meeting its goals.

Balanced Scorecard

A strategic planning tool that identifies important metrics to measure and target goals for comparison.

XBRL

eXtensible Business Reporting Language, a type of XML used to organize and define financial elements for reporting.

Tax Efficiency

Refers to the efficiency and effectiveness of technology, processes, and people in managing a company's tax function.

What-If Analysis

An analytic method used to evaluate the impacts of different scenarios on outcomes, especially in tax planning.

Tax Sustainability

The ability to maintain similar tax performance over time, measured through KPIs such as the effective tax rate.

Diagnostic Analytics

Detects correlations and patterns of interest compared to benchmarks to explain past results.

Prescriptive Analytics

Recommends actions based on observed data to optimize performance based on potential constraints.

Text Mining

Analyzes the frequency of words in unstructured data, matching them with a sentiment dictionary.

Audit Sampling

The application of an audit procedure to less than 100\% of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class.

Data Governance

The overall management of the availability, usability, integrity, and security of data used in an enterprise, including auditing and analytics.

Benefits of Data Analytics in Auditing

Enhances audit quality, efficiency, and effectiveness by providing deeper insights, identifying anomalies, and improving risk assessment and evidence gathering.

Which of the following is an example of descriptive analytics?

Summary statistics

performance metric

according to the authors the use of xbrl tags allows data to be quickly

transmitted and received

level of job satisfaction of the tax personnel would be an example of which kind of kpi

tax efficiency and effectiveness

Which of the following would be considered to be a diagnostic analytics technique in managerial accounting?

Price and rate variance analysis

On a Balanced Scorecard, which is not included as a component?
a. Financial Performance

Employee Capacity

what type of analytics would help auditors find missing checks

sequence checks

performance comparisons to a companies own past performance or to its competitors would be considered ___ analytics

diagnostic

what is the name of the output from data vendors to help compare companies using different xbrl tags for revenue

standardized metrics

The IRS has an algorithm called _______ that pulls historical data for average amount and type of deductions related to income and predicts the likelihood of underreported income.

Discriminant Function 

an example of a tax cost KPI would be

Effective Tax Rate (ETR)