Deck 7: Perform the Analysis: Diagnostic Analyses

Question 1

A realistic expectation an accountant could hold is that addresses of the company vendors are not similar to that of the company employees.

Answer 1

True

Question 2

According to the textbook, U.S. businesses will lose 7 percent, on average, of their gross revenues to fraud, with projected losses of more than $7 trillion.

Answer 2

False

Question 3

In fuzzy matching, if the tolerance for a match is set to 0%, what is the likely consequence for finding potential matches?

A) Too many potential matches
B) Only exactly matches, no potential matches
C) Good mix between exact and potential matches
D) Too few potential matches

Answer 3

A

Question 4

What is an example of a cash reconciling item for an item recorded by the bank but not yet recorded in the general ledger?

A) Interest earned on notes held by the bank
B) Outstanding deposits
C) Outstanding checks
D) There are no items recorded by the bank but not recorded in the general ledger.

Question 5

According to Benford's law, numbers with the first digit "4" are more likely than those with first digit "3".

Question 6

A realistic expectation an accountant may hold is that "Most accounting transactions are made and recorded during normal work hours and normal workdays".

Question 7

Diagnostic analytics is performed to investigate the underlying reasons for past results that cannot be answered by simply looking at the descriptive data.

Question 8

Standard cost is an estimated, or expected, cost of producing a good or service used in management accounting.

Question 9

According to Benford's law, what is the expectation for the percentage of times that the first digit of a number is the number "1"?

A) 15.12%
B) 24.58%
C) 35.80%
D) 30.10%

Question 10

In fuzzy matching, if the tolerance for a match is set to 100%, what is the likely consequence for finding potential matches?

A) Too many potential matches
B) Only exact matches, no potential matches
C) Good mix between exact and potential matches
D) Too few potential matches

Question 11

Which of the following can potentially find a transaction that is recorded twice?

A) Fuzzy matching
B) Test of duplicates
C) Benford's law
D) Sequence check

Question 12

__________ is used to help find customers that might have a similar address or name as employees.

A) Duplicate testing
B) Sequence check
C) Benford's law
D) Fuzzy matching

Question 13

Analysis regarding the most profitable customer is an example of diagnostic analytics.

Question 14

The appropriate test to compare one sample to another sample to see if one is greater than another in some way is called a(n) __________.

A) regression
B) two-sample t-test of a difference in means
C) one-sample t-test of a difference in means
D) chi-squared test of a difference in means

Question 15

The saying "Half the money I spend on advertising is wasted; the trouble is I don't know which half", illustrates the problem with knowing precisely how much value accrues from advertising expenses to sales or the value of the firm.

Question 16

Which cash reconciling item could potentially affect either the bank statement or the general ledger?

A) Recording error
B) Interest earned on notes held by the bank
C) Outstanding deposit
D) NSF checks

Question 17

A realistic expectation an accountant could hold is that each transaction (e.g., cash receipt or cash disbursement) is dependent on any other similar transaction.

Question 18

If the data analyst hypothesizes that grocery sales are higher when payment is made using credit cards compared to cash payment, the null hypothesis would likely state that grocery sales are lower when payment is made using credit cards compared to cash payment.

Question 19

A realistic expectation an accountant could hold is that each transaction (e.g., cash receipt or cash disbursement) is independent of (not identical to) any other similar transaction.

Question 20

Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. What is the expectation when the usage of raw materials unexpectedly decreases below the standard quantity used?

A) Unfavorable price variance
B) Favorable price variance
C) Unfavorable quantity variance
D) Favorable quantity variance

Question 21

If the data analyst hypothesizes that grocery sales are higher on Sunday than on other days, the null hypothesis would likely state that:

A) Grocery sales are lower or no different on Sunday than on other days.
B) Grocery sales are higher on Sunday than on other days.
C) Grocery sales are higher or no different on Sunday than on other days.
D) Grocery sales are lower on Sunday than on other days.

Question 22

Evaluating the relationship between R&D expenditures and net income is an example of the diagnostic analytics of __________.

A) performing drill-down detailed analytics
B) determining relations/patterns/linkages between variables through statistical analysis
C) identifying anomalies/outliers
D) performing descriptive analytics

Question 23

Benford's law applies to the ______.

A) first digit only
B) second digit only
C) both the first and second digit
D) neither the first nor second digit

Question 24

Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. What is the expectation when the price of raw materials unexpectedly decreases below the standard price?

A) Unfavorable price variance
B) Favorable price variance
C) Unfavorable quantity variance
D) Favorable quantity variance

Question 25

Commitment to prior investments escalates and makes it harder to abandon prior investments even if it may not make rational sense is called __________ .

A) cost abandonment fallacy
B) sunk cost fallacy
C) commitment cost fallacy
D) committed cost fallacy

Question 26

Internal controls testing is an example of what type of data analytics?

A) Identifying anomalies and outliers
B) Finding previously unknown linkages, patterns, or relationships between variables
C) Performing marginal analysis
D) Performing descriptive analytics

Question 27

Analyzing the sales journal to find the most profitable product sold is an example of what type of diagnostic analytics?

A) Identifying anomalies and outliers
B) Finding previously unknown linkages, patterns, or relationships between variables
C) Performing marginal analysis
D) Performing descriptive analytics

Question 28

Testing using fuzzy matching is an example of which type of diagnostic analytics?

A) Identifying anomalies and outliers
B) Finding previously unknown linkages, patterns, or relationships between variables
C) Performing marginal analysis
D) Performing descriptive analytics

Question 29

Analytics of the inventory item that produces the most profit is an example of the diagnostic analytics of __________.

A) performing drill-down detailed analytics
B) determining relations/patterns/linkages between variables through statistical analysis
C) identifying anomalies/outliers
D) performing descriptive analytics

Question 30

The test to see if the key number field in a record is in correct ascending or descending order is called a(n) __________ check.

A) order
B) sequence
C) compliance
D) sorting

Question 31

What is an observation that lies outside its expected distribution?

A) Outlier
B) Unexpected observation
C) Fuzzy matching
D) Management by exception

Question 32

Diagnostic analytics addresses which of the following questions?

A) What happened?
B) Why did it happen?
C) Will it happen in the future?
D) Based on what we expect will happen, how do we optimize?

Question 33

Benford's law follows the distribution:

A) log ₁₀(1 + (1/ d)), where d is each digit 1, 2, and so on
B) log ₁₀(d + (1/ d)), where d is each digit 1, 2, and so on
C) ln ₁₀(1 + (1/ d)), where d is each digit 1, 2, and so on
D) ln ₁₀(d + (1/ d)), where d is each digit 1, 2, and so on

Question 34

If we are running a regression to analyze the question if advertising expenses are related to sales revenue outcomes, what would be the independent variable?

A) sales revenue
B) advertising expenses
C) cost of goods sold
D) operating expenses

Question 35

Diagnostic analysis includes all of the possible types of analytics except for which of the following?

A) Identifying anomalies and outliers
B) Performing drill-down detailed analytics
C) Performing marginal analysis
D) Performing statistical analysis

Question 36

Performing a bank reconciliation is example of the diagnostic analytics of __________.

A) performing drill-down detailed analytics
B) determining relations/patterns/linkages between variables through statistical analysis
C) identifying anomalies/outliers
D) performing descriptive analytics

Question 37

Where would the company likely get data evaluating the customer with the highest dollar amount of orders in the past month?

A) Customer relationship management system
B) Accounting system
C) Human resources system
D) Supply chain system

Question 38

Testing for duplicate transactions is an example of what type of diagnostic analytics?

A) Identifying anomalies and outliers
B) Finding previously unknown linkages, patterns, or relationships between variables
C) Performing marginal analysis
D) Performing descriptive analytics

Question 39

According to Benford's law, which one of these first digits have a lower probability of occurrence than the first digit "5"?

A) 3
B) 2
C) 4
D) 9

Question 40

Analyzing relationships between vendors and A/P clerks to find potentially fraudulent relationships is an example of what type of diagnostic analytics?

A) Identifying anomalies and outliers
B) Finding previously unknown linkages, patterns, or relationships between variables
C) Performing marginal analysis
D) Performing descriptive analytics

Question 41

In a bank reconciliation, outstanding checks are recorded by the __________, but not yet by the __________.

A) company; bank
B) bank; company
C) vendor; bank
D) bank; vendor

Question 42

If the p-value of the chi-square test is __________ than the α (alpha) threshold, we could conclude that the observed relationship is __________ than that expected from Benford's law.

A) greater; greater
B) smaller; smaller
C) smaller; different
D) greater; different

Question 43

The practice of bringing specific issues to the attention of management if they depart from expectation is called __________.

A) anomaly
B) management by exception
C) outlier
D) fuzzy matching

Question 44

Diagnostic analytics is broken down into all except for which of the following broad categories?

A) Identifying anomalies and outliers
B) Performing drill-down detailed analytics
C) Performing statistical analyses
D) Performing descriptive analytics

Question 45

Segregation of duties suggests separating all of the following from each other except:

A) Custody of assets
B) Authorization of the use of the assets
C) Recordkeeping
D) Use of the assets

Question 46

The importance of understanding the root cause of an outlier is to

A) identify potentially fraudulent activity.
B) help management understand favorable variances.
C) help management understand unfavorable variances.
D) All of the items listed.

Question 47

__________ looks for underlying patterns in the data by examining the data at a more detailed level in order to examine potential correlations.

A) Fuzzy matching
B) Drill-down detailed analytics
C) Summarizing data
D) Descriptive analytics

Question 48

Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. What is the expectation when unplanned overtime is required to complete the job?

A) Unfavorable labor rate variance
B) Favorable labor rate variance
C) Unfavorable price variance
D) Favorable price variance

Question 49

In a bank reconciliation, NSF checks are recorded by the __________, but not yet by the __________.

A) company; bank
B) bank; company
C) vendor; bank
D) bank; vendor

Question 50

The practice of identifying the difference between a budget amount and actual performance is called:

A) anomaly analysis
B) outlier analysis
C) variance analysis
D) management by exception