Exam 2 - Chapter 7 - Diagnostic Analytics Flashcards
Define diagnostic analytics:
What are the two categories of diagnostic analytics?
Analytics performed to investigate the underlying reasons for past results that cannot be answered by just looking
How it is used:
- Identifying anomalies and outliers
- Finding previously unknown linkages, patterns
How can diagnostic analysis be used to find previously unknown linkages, patterns, and relationships in data?
Performing drill-down analytics:
Examine potential correlations to summarize data at different levels to look for underlying patterns.
Perform statistical analyses
Uncover patterns by looking at how data moves together.
What are anomalies and outliers?
Anomaly = something that departs from the norm
outlier = observation, or data point, that lies outside its expected distribution
In order to detect anomalies or outliers, what must be done?
Establish an expected value or norm:
For example, standard cost
Use this flashcard to view real world examples of anomalies and outliers:
Explain this technique for identifying anomalies/outliers:
Segregation of Duties
- What activities are important to separate?
Internal control that requires more than one person to complete accounting tasks to prevent fraud or erros.
Important to separate:
- Custody of assets
- Authorization of the use of assets
- Recordkeepiing
Explain the steps in identifying this anomaly/outlier:
Unusual transactions
- Was there unusual holiday, weekend, or end of quarter activity
- did they have proper authorization
- If there were a lot, why did it occur?
- What was tha nature
- Was it fraud or circumstancial
Explain the steps in indentifying these anomalies/outliers:
Duplicate Transactions
- Were there duplicate invoices recorded twice on same day, for same amounts, and with same vendor
- If there were duplicates, why?:
- What was the nature?
- Are they fraud or just erros?
What is this technique for finding anomalies/outliers:
Fuzzy matching
Technique to find potential equivalents when there is not an exact match?
What are the steps for finding this anomalies/outliers:
Fuzzy matching
- Were there any close matches of employee, vendor, or customer names
- If so, why did they occur
- What was the nature
- Was it due to fraud (employees making up fake vendors to send money to themselves)
In searching for outliers/anomalies, what should accountants look for in missing checks/payments?
Look for sequence checks
Look for gaps in sequence numbers of checks; were checks voided or outstanding
Bank reconciliation:
What are outstanding checks and deposits?
outstanding check
Checks written by company but not processed by bank
Outstanding deposit
Deposits recorded by company but not processed by bank
Bank Reconciliations:
What are NSF checks?
Checks reported as received by company
Bank does not recognize because check writer has insufficient funds
Bank reconciliation; What are these items:
- Electronic funds transfer (wire transfer)
- Notes
- Bank service fees
Electronic funds transfer (wire transfer)
- Transfers received by bank but not yet reflected by company
Notes
- Loans made to customers; interest collected by bank.
- Company may not know amounts until bank statements are released
Bank service fees
Fees charged by bank directly through account; company does not recognize until bank statement is released
What is this technique for finding anomalies:
Variance analysis
Managerial accounting analysis used to explain the difference between budget amounts and actual performance
Use this flashcard to understand Benford’s law and sample distribution
observations that do not match this distribution are an anomaly
