Module 18 Audit Process: The Use of Statistics

Question 1

Mean

Answer 1

The average of a numerical dataset calculated by summing the values in a population and dividing by the number of items in the data set

Question 2

Median

Answer 2

A measure of the central point in a dataset

Question 3

Mode

Answer 3

The most frequently occurring number found in a numerical dataset

Question 4

Standard deviation

Answer 4

A measure of the dispersion of a numerical dataset showing the average distance between the values of the data in the set and the mean.

Question 5

Outlier

Answer 5

Data point that significantly differs from the other data points

Question 6

Benford’s Law

Answer 6

Probability distribution for the likelihood of the first digit in a set of numbers

Question 7

Regression analysis

Answer 7

Understand the relationship between a dependent variable and an independent variable based on past relationships

Question 8

Correlation

Answer 8

• Statistical association or relationship between two variables
• Correlation does not eqaual causation

Question 9

Statistical sampling

Answer 9

• Random selection of the sample items
• The use of probability theory to evaluate sample results

Question 10

Disadvantages of statistical sampling

Answer 10

• May not be an efficient if not electronic
• Requires additional expertise

Question 11

Advantages of statistical sampling

Answer 11

• More targeted and efficent
• Reduce risk of auditor judgement
• Allows erros to be quantified and extrapolated
• Measure of sufficiecny of evidence

Question 12

Random seed

Answer 12

• Starting point when generating a random sample
• Software that generates the random seed based on specific criteria so it can be reperformed