Analytic Type Drills

Question 1

An auditor analyzes past sales data to identify patterns and then uses this information to forecast next quarter’s sales volume. What type of analytic is the auditor using?

Answer 1

Predictive analytic.

This analytic uses historical data to forecast or predict future outcomes, such as expected sales volume, based on identified patterns.

Question 2

An auditor groups accounts receivable by aging categories (current, 30-60 days, 61-90 days) to summarize the status of outstanding balances. What type of analytic is this?

Answer 2

Descriptive analytic.

This analytic summarizes and describes what has already happened in the data without making predictions or explaining causes.

Question 3

An auditor investigates a sudden drop in the current ratio by drilling down into the components of current assets and liabilities to understand the cause. What type of analytic is this?

Answer 3

Diagnostic analytic.

This analytic seeks to explain why something happened by exploring relationships and causes within the data, such as investigating the reason behind a change in financial ratios.

Question 4

Frank ages accounts receivable balances into categories like current, 30-60 days, and over 90 days to evaluate the reasonableness of the allowance for credit losses. What type of analytic is Frank performing?

Answer 4

Descriptive analytic.

This analytic summarizes and describes the data as it exists (aging the receivables), rather than explaining why balances changed or predicting future outcomes.

Question 5

An auditor uses regression analysis on historical sales data to estimate the likelihood that new customer sales will be approved or rejected. What type of analytic is this?

Answer 5

Predictive analytic.

This analytic uses historical data and statistical models to forecast or predict future outcomes, such as approval likelihood for new sales transactions.

Question 6

An auditor drills down into a significant increase in the allowance for doubtful accounts compared to prior years to understand the reasons behind the change. What type of analytic is this?

Answer 6

Diagnostic analytic.

This analytic explains why something happened by investigating causes and relationships within the data, such as analyzing why the allowance for doubtful accounts increased.

Question 7

An auditor uses what-if analysis to recommend changes in the client’s inventory management process to reduce stockouts based on predicted demand. What type of analytic is this?

Answer 7

Prescriptive analytic.

This analytic goes beyond predicting outcomes to recommending specific actions or strategies to achieve desired results, such as improving inventory management.

Question 8

An auditor uses variance analysis to investigate why this year’s bad debt expense is significantly higher than last year’s. What type of analytic is this?

Answer 8

Diagnostic analytic.

This analytic explains why something happened by examining differences and underlying causes, such as analyzing the reasons for an increase in bad debt expense.

Question 9

An auditor uses what-if scenarios to determine the best course of action to reduce the risk of inventory shortages based on predicted future demand. What type of analytic is this?

Answer 9

Prescriptive analytic.

This analytic recommends specific actions or strategies to achieve desired outcomes, such as optimizing inventory management based on predicted demand.

Question 10

An auditor reviews monthly sales reports to summarize total sales and average transaction amounts for each region during the past year. What type of analytic is this?

Answer 10

Descriptive analytic.

This analytic summarizes historical data to show what has happened, such as total and average sales by region, without explaining causes or predicting future outcomes.

Question 11

An auditor uses variance analysis to compare this year’s expenses to last year’s and investigates significant differences to understand the reasons behind them. What type of analytic is this?

Answer 11

Diagnostic analytic.

This analytic explains why something happened by examining differences and underlying causes, such as investigating reasons for expense variances.

Question 12

An auditor uses clustering techniques to group transactions with similar characteristics to identify unusual patterns that may indicate fraud. What type of analytic is this?

Answer 12

Diagnostic analytic.

This analytic explains why something happened by uncovering patterns and relationships in the data, such as grouping transactions to detect anomalies or fraud risks.

Question 13

An auditor uses clustering to group similar transactions and identify unusual patterns that might indicate errors or fraud. What type of analytic is this?

Answer 13

Diagnostic analytic.

This analytic explains why something happened by uncovering patterns and relationships in the data to explain outcomes, such as detecting anomalies through clustering.

Question 14

An auditor uses historical sales and credit approval data to build a model that classifies new sales transactions as likely approved or rejected based on past patterns. What type of analytic is this?

Answer 14

Predictive analytic.

This analytic uses historical data to create a model that predicts future outcomes, such as whether new sales should be approved or rejected based on prior transaction patterns.

Question 15

An auditor uses historical data to build a model that classifies transactions as approved or rejected to evaluate if current large sales to new customers align with past patterns. What type of analytic is this?

Answer 15

Predictive analytic.

This analytic uses past data to predict or classify future or current outcomes, such as whether transactions should be approved based on historical approval and rejection patterns.

Question 16

An auditor uses historical sales and credit approval data to build a classification model that predicts whether new sales transactions should be approved or rejected. What type of analytic is this?

Answer 16

Predictive analytic.

This analytic uses past data to forecast or classify future outcomes, such as predicting approval or rejection of transactions based on historical patterns.

Question 17

An auditor reviews a flowchart of the accounts payable process and uses natural language processing to identify discrepancies in supplier invoices, then recommends process improvements. What type of analytic is this?

Answer 17

Prescriptive analytic.

This analytic not only analyzes data but also recommends actions or improvements based on the findings, such as suggesting process changes after identifying invoice discrepancies.

Question 18

An auditor performs a variance analysis comparing this year’s and last year’s inventory balances and investigates significant differences to understand the cause. What type of analytic is this?

Answer 18

Diagnostic analytic.

This analytic explains why something happened by analyzing differences and underlying causes, such as investigating reasons for inventory balance changes.

Question 19

An auditor reviews a detailed listing of supplier invoices, scans them into digital format using OCR, and applies natural language processing to identify discrepancies and recommend corrections. What type of analytic is this?

Answer 19

Prescriptive analytic.

This analytic not only identifies issues but also recommends actions to improve processes or correct errors, such as suggesting invoice corrections based on detected discrepancies.

Question 20

An auditor performs a year-over-year comparison of sales data to summarize trends and identify any unusual fluctuations. What type of analytic is this?

Answer 20

Descriptive analytic.

This analytic summarizes and describes historical data to show what has happened, such as comparing sales across periods, without explaining causes or predicting future outcomes.