Question 1

Before using client data for audit data analytics the auditor needs to consider which of the following?
A)If the data obtained from the client is complete.
B)If the data is in a consistent format and whether it needs to be cleaned before it can be used.
C)Whether the data is relevant and reliable.
D)All these answer choices are correct.

Accepted Answer

All three options are necessary considerations before using client data for audit data analytics. The data needs to be complete so that it is representative of the client's operations. The data needs to be in a consistent format and clean to enable efficient analysis. The data also needs to be relevant and reliable to support audit findings and conclusions. Therefore, all answer choices are correct.

Question 2

A notable item is an item identified, from the population being analyzed, that has one or more characteristics that, for relevant assertions, may:
A)Be indicative of a risk of material misstatement
B)Provide information useful in designing procedures to address risks of material misstatement.
C)Provide information useful in tailoring procedures to address risks of material misstatement.
D)All these answer choices are correct.

Accepted Answer

All of the answer choices are correct. Notable items can be indicative of a risk of material misstatement and can provide useful information in designing and tailoring procedures to address those risks. Therefore, all three answer choices are relevant in relation to the significance of notable items in the audit process.

Question 3

An issue addressed in the AICPA Guide to Audit Data Analytics is _______.
A)what to do when initial investigation identifies a large number of notable items
B)what to do when initial investigation identifies a small number of notable items
C)how to reconcile data analytics and revenue recognition
D)how to ensure adherence to matching of revenues and expenses using audit data analytics

Accepted Answer

The AICPA Guide to Audit Data Analytics specifically provides guidance on what to do when initial investigation identifies a large number of notable items, including how to prioritize and further investigate them.

Question 4

If the auditor is auditing an accounts receivable file, the auditor will want to make sure the receivable file matched the_______.
A)general ledger as of the date of the test.
B)trial balance as of the date of the test.
C)investing section of the statement of cash flows as of the date of the test.
D)general ledger as of any date before the test.

Accepted Answer

The accounts receivable file should match the general ledger since it represents a summary of all accounts receivable transactions. The trial balance may also include accounts receivable, but it does not provide the same level of detail as the general ledger. The investing section of the statement of cash flows only shows cash inflows and outflows related to investments, and is not relevant to accounts receivable. Checking the general ledger before the date of the test is not necessary as it does not provide information on the current state of the accounts receivable file.

Question 5

If the auditor is auditing revenues and identifies gaps in the sequence of pre-numbered sales invoices, _______.
A)the auditor is unlikely facing a completeness problem, even if the file reconciles with the general ledger
B)the auditor may be facing a completeness problem, even if the file reconciles with the general ledger
C)the auditor may be facing a valuation problem, even if the file reconciles with the general ledger
D)the auditor is unlikely facing a valuation problem, even if the file reconciles with the general ledger

Accepted Answer

Gaps in the sequence of pre-numbered sales invoices suggest that there may be missing transactions, indicating a completeness problem. This issue would exist even if the file reconciles with the general ledger. It is important for the auditor to investigate the cause of these gaps and ensure that all transactions have been recorded accurately in the company's financial statements. A valuation problem would be related to how the transactions are recorded, which is not relevant to the issue of gaps in the sequence of pre-numbered sales invoices.

Question 6

Some important aspects of any audit, including audit data analytics, pertain to the _______.
A)nature, extent, and timing of the audit procedures
B)prior auditor's assistance with audit procedures
C)ultimate issuance of an audit opinion by senior management
D)stock price, and ensuring it is not negatively affected by the audit

Accepted Answer

The nature, extent, and timing of the audit procedures are essential aspects of any audit, including audit data analytics. These determine the scope of the audit and the methods used to evaluate the financial statements and related disclosures. This information is critical to ensure that the audit is effective and provides relevant and reliable information to stakeholders. The other options are not directly related to the audit process or its objectives.

Question 7

It is common for data problems to arise when a company_______.
A)has no subsidiaries and has not acquired any other companies
B)acquires another company
C)changes accounting method
D)changes an accounting estimate

Accepted Answer

When a company acquires another company, there can be data integration issues between the two companies' systems, leading to data problems.

Question 8

Once the auditor has determined that the data is complete and data is available for all desired fields, _______.
A)the auditor must also make sure that the data is clean and ready for analysis
B)the auditor must also make sure that the data is clean and ready for submittal to the internal auditors for analysis
C)the auditor should seek management's permission to proceed
D)the data set should be turned over to the client's legal counsel for further processing

Accepted Answer

Once the auditor has determined that data is complete and data is available for all desired fields, the next step is to ensure that the data is clean and ready for analysis. This includes checking for any errors or inconsistencies in the data that may impact the accuracy of the analysis. It is important to clean the data before analysis to ensure that the results are accurate and reliable.

Question 9

When performing audit data analytics (ADA) as a risk assessment procedure, _______.
A)the auditor will have first obtained an understanding of the entity and its environment
B)the auditor is yet to obtain an understanding of the entity and its environment
C)the auditor will work closely with client management to confirm which risk assessment procedures they would prefer the auditor conduct
D)the auditor should contact the prior auditor for assistance with this procedure

Accepted Answer

Before conducting any audit procedure, including audit data analytics, the auditor must first obtain an understanding of the entity and its environment, which includes assessing the risks of material misstatement in the financial statements. This understanding will inform the auditor's selection and application of audit procedures, including ADA, to obtain sufficient and appropriate audit evidence. Therefore, choice A is the best option. Choices B, C, and D are incorrect because they do not reflect the proper sequence of audit procedures and responsibilities.

Question 10

The auditor should always evaluate evidence _______.
A)with a questioning mind and attitude of professional skepticism
B)under the assumption that all information is correct
C)under the assumption that all information is incorrect
D)after senior management has had a chance to review and approve it

Accepted Answer

The auditor should always evaluate evidence with a questioning mind and attitude of professional skepticism. This means that the auditor should not accept information at face value and should always be skeptical of the information presented until sufficient evidence has been obtained to support it. This approach helps the auditor to maintain objectivity and independence, and to identify any potential errors or fraud.

Question 11

Popular ways that an auditor might search an audit population for notable items include:
A)Clustering transactions or balances based on a particular characteristic or multiple characteristics.
B)Matching the characteristics of two populations to see if there are any overlaps.
C)Statistical analysis, such as regression analysis, where the notable items are identified using statistics
D)All these answer choices are correct.

Accepted Answer

All of the choices presented are common ways for auditors to search for notable items in a population. Clustering transactions or balances based on certain characteristics can help identify groups of transactions that may be more susceptible to fraud or error. Matching the characteristics of two populations can help identify overlaps or discrepancies that may require further investigation. Statistical analysis, such as regression analysis or other techniques, can help identify outliers or unusual patterns that warrant further investigation. Therefore, all of the answer choices are correct.

Question 12

Audit data analytics (ADA)_______.
A)is effective not only for identifying general types of misstatements, but is also capable of identifying specific transactions or accounts that are likely to be misstated
B)is effective only for identifying general types of misstatements
C)is only capable of identifying specific transactions or accounts that are likely to be misstated
D)is effective neither at identifying general types of misstatements or capable of identifying specific transactions or accounts that are likely to be misstated

Accepted Answer

Audit data analytics (ADA) is effective not only for identifying general types of misstatements, but it is also capable of identifying specific transactions or accounts that are likely to be misstated. ADA uses advanced technology and techniques to analyze large volumes of data quickly and efficiently, allowing auditors to identify patterns and anomalies that may be indicative of fraud, errors, or other issues. This can help auditors to focus their efforts on areas that are most likely to be problematic, leading to more effective and efficient audits.

Question 13

Some key questions that the AICPA Guide for Audit Data Analytics suggests that the auditor should address when evaluating the reliability of data used in an audit data analytics (ADA) application are:
A)What is the nature of the data?
B)What is the source of the data?
C)What is the process used to produce the data?
D)All these answer choices are correct.

Accepted Answer

All of these questions are important for evaluating the reliability of data used in an ADA application. The nature of the data informs the auditor about potential biases or limitations in the data, the source of the data informs the auditor about the integrity of the data provider, and the process used to produce the data informs the auditor about the accuracy and completeness of the data.

Question 14

If an existing customer number is taken from a former customer that no longer does business with the company and is assigned to a new customer, _______.
A)this may cause problems with the underlying data analysis
B)then no problems should occur and the testing should be straightforward
C)this should not complicate or cause issues with the data analysis
D)the auditors should generate a new customer number and assign it to the old customer

Accepted Answer

Reusing a customer number could result in inaccurate data analysis, as it may appear as if the former customer is still active and conducting business with the company. The auditors should investigate and determine the best course of action to ensure data integrity.

Question 15

When the auditor uses audit data analytics, _______.
A)the auditor is looking for anomalies, or balances or transactions that do not meet the auditor's expectations
B)the auditor is looking for anomalies only
C)the auditor is only looking for balances or transactions that do not meet the auditor's expectations
D)the auditor is neither looking for anomalies, nor balances nor transactions that do not meet the auditor's expectations

Accepted Answer

When the auditor uses audit data analytics, the auditor is looking for anomalies, or balances or transactions that do not meet the auditor's expectations. This helps the auditor identify potential issues or fraud.

Question 16

When a new company is acquired, _______.
A)there is rarely any disruption to accounting and information technology (IT) systems
B)there is frequently a period of transition and integration of accounting and IT systems when different formats are introduced
C)there is infrequently a period of transition and integration of accounting and IT systems when different formats are introduced.
D)the acquiring company's systems are immediately discontinued and replaced with the acquiring company's systems

Accepted Answer

When a new company is acquired, there is frequently a period of transition and integration of accounting and IT systems when different formats are introduced. This is because the acquiring company may have different systems and software in place than the company being acquired, and they need to be integrated or replaced to ensure smooth operations. It is not uncommon for there to be some disruption during this period of transition.

Question 17

The term notable item refers to something that _______.
A)is indicative of a risk of material misstatement
B)has not been previously identified (a new risk)
C)represents a higher risk of material misstatement than anticipated by the auditor
D)All these answer choices are correct.

Accepted Answer

All of the answer choices are correct and can be considered a notable item. A notable item is essentially anything that brings attention to the risk of material misstatement during an audit. Thus, any of the scenarios outlined in the answer choices could qualify as a notable item.

Question 18

Defining notable items depends on _______.
A)the assertion being audited, and the auditor's understanding of the business and industry.
B)the assertion being audited only
C)the auditor's understanding of the business and industry only
D)neither the assertion being audited, nor the auditor's understanding of the business and industry.

Accepted Answer

Defining notable items depends on both the assertion being audited and the auditor's understanding of the business and industry. The auditor needs to understand the business and industry to identify potential risks and significant transactions, and then use this understanding to assess the materiality of those items for the financial statement audit.

Question 19

The auditor determines the relevance of data by _______.
A)the nature of the audit question or assertion being tested
B)confirming its relevancy with senior management
C)ensuring the data is unrelated to any audit assertion the auditor wishes to test
D)inquiring of the internal auditors

Accepted Answer

The relevance of data is determined by the nature of the audit question or assertion being tested. This helps the auditor ensure that the data they are using is directly related to the audit objective and can provide useful information in evaluating the subject matter. The other options - confirming relevancy with senior management, ensuring the data is unrelated to the audit objective, and inquiring with internal auditors - do not directly address the issue of relevance and may not be useful in determining whether the data is relevant to the audit objective.

Question 20

Which of the following is a step associated with accessing and preparing data for audit data analytics (ADA)?
A)Checking the completeness of the data set to be used for ADA
B)Ensuring the match of ADA data with the balance sheet
C)Presenting a data set or key information as a chart or other image
D)Matching ADA with the general ledger

Accepted Answer

Checking the completeness of the data set to be used for ADA is an important step in accessing and preparing data for audit data analytics. This involves ensuring that all relevant data is available and that there are no missing pieces of information that could affect the accuracy of the analysis. The other options listed are not specific steps associated with accessing and preparing data for ADA.

Quiz 7: Data Analyticsoverview and Application

Before using client data for audit data analytics the auditor needs to consider which of the following?

A notable item is an item identified, from the population being analyzed, that has one or more characteristics that, for relevant assertions, may:

An issue addressed in the AICPA Guide to Audit Data Analytics is _______.

If the auditor is auditing an accounts receivable file, the auditor will want to make sure the receivable file matched the_______.

If the auditor is auditing revenues and identifies gaps in the sequence of pre-numbered sales invoices, _______.

Some important aspects of any audit, including audit data analytics, pertain to the _______.

It is common for data problems to arise when a company_______.

Once the auditor has determined that the data is complete and data is available for all desired fields, _______.

When performing audit data analytics (ADA) as a risk assessment procedure, _______.

The auditor should always evaluate evidence _______.

Popular ways that an auditor might search an audit population for notable items include:

Audit data analytics (ADA) _______.

Some key questions that the AICPA Guide for Audit Data Analytics suggests that the auditor should address when evaluating the reliability of data used in an audit data analytics (ADA) application are:

If an existing customer number is taken from a former customer that no longer does business with the company and is assigned to a new customer, _______.

When the auditor uses audit data analytics, _______.

When a new company is acquired, _______.

The term notable item refers to something that _______.

Defining notable items depends on _______.

The auditor determines the relevance of data by _______.

Which of the following is a step associated with accessing and preparing data for audit data analytics (ADA) ?