Week 5-2 Flashcards

1
Q

regressions in the audit

A
  • Regression analysis
    o Relates a ‘dependent’ variable to one or more known independent variables
    o Assume: past relationships expect to continue in the future
  • Aids auditor by
    o Generating the expectation
    o Determining if the difference between actual and expectation warrants investigation
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2
Q

Analytical procedures in external auditing. Literature survey – Appelbaum, Kogan, Vasarhelyi (2019)
technieques in audit phases

A

Business analytics is ‘the use of data, information technology, statistical analysis, quantitative methods, and mathematical or computer-based models to help managers gain improved insight about their operations, and make better, fact-based decisions’
- External audit analytics (EEA): the utilization of various analytical procedures, methods, and models to facilitate the transformation of data into external audit evidence and subsequently into audit decision. EAA may be considered as a special sub-are of the wider are of Business Analytics (BA) since public auditors examine business financial data

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3
Q

Audit data analytics (ADA) leads to

A

o Improved understanding of entities operations and risk
o Increased potential for detecting misstatements
o Improved communication with governance

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4
Q

Implementation issues ADA

A
  • Firms differ in their strategies on how to implement ADA
  • Unclear how supervisory inspection authorities evaluate (like PCAOB) and accept ADA generated audit evidence
  • Result: no implementation of the mandatory use of ‘advanced’ ADA tools
  • Limited use of ADA will persist until incorporated in the audit methodologies, supported by standard setters and accepted by supervisory bodies
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