Data Interpretation & Reporting Flashcards

An auditor runs a full-population journal entry analysis and flags 4,800 entries posted on weekends. What is the most appropriate next step?

Answer: Refine the criteria or stratify the results to isolate entries with higher risk characteristics

Large exception volumes often contain false positives, so auditors refine criteria or group results before investigating.

In a substantive analytical procedure, the difference between the recorded amount and the auditor's expectation exceeds the threshold. What must the auditor do?

Answer: Investigate the difference through inquiry and corroborating evidence

Differences above the threshold require investigation, with management explanations corroborated by other evidence.

Which visualization is best suited to show how monthly revenue compares with prior-year months to spot an unusual spike?

Answer: Line chart with both years plotted

Line charts display trends over time and make period-over-period deviations easy to see.

A regression model used to build an expectation for payroll expense has an R-squared of 0.35. How should the auditor interpret this?

Answer: The model explains relatively little of the variation, so the expectation may lack precision

A low R-squared means the predictors explain little of the variance, which weakens the precision of the expectation.

Under the AICPA Guide to Audit Data Analytics, why is it important to document the parameters and filters applied in an ADA?

Answer: So the procedure can be reperformed and the basis for conclusions understood

Documentation must allow an experienced auditor to understand the nature, timing, extent and results of the procedure.

An ADA finds that 12 vendors share bank account numbers with employees. How should this result be communicated if it indicates a significant deficiency in internal control?

Answer: In writing to management and those charged with governance

AU-C 265 requires significant deficiencies and material weaknesses to be communicated in writing to management and those charged with governance.

Which outcome best describes a 'false negative' in an exception-based ADA?

Answer: A misstated item that the analytic failed to flag

A false negative is a real problem the analytic did not detect, which relates to detection risk.