Building Blocks
Journal entries in the general ledger
On going record
general ledger
Reporting internally and externally
financial reports
The Accounting Cycle
transactions, journal (post), ledger (make corrections), trial balance (temporary adjustment accounts), reporting
Subsidiary Ledger
detailed listing that that supports a “control account” (ex: A/R subsidiary ledger)
Trial Balance
T Charts; debit, credit, or balance sheet
Data Analytics:
process of evaluating data with the purpose of drawing conclusions to address business questions.
Qualitative Data
Categorical data like group, rank, count
Nominal Data
Simple Data like hair color
Quantitative Data
Numerical Data like age, height, $$
Ratio Data
Defines 0 as “absence” of something($)
Interval Data
Where 0 is just another number (temperature)
Discrete Data
show only whole numbers (points in a 🏀 game)
Continuous Data
shows numbers with decimals (height)
Distributions
describe the mean, median and stdev of the data
Declarative vitualizations
used to present findings aka financial results
exploratory visualizations
are used to gain insights while you’re interacting with data such as identifying good vs bad customers
conceptual and declarative (qualitative)
goal is to simplify concepts and processes; it is the idea illustration of processes or frameworks
declarative and data-drive (quantitative)
goal is to affirm concepts and set context; traditional data visualizations
conceptual and exploratory (qualitative)
goal is to discover, simplify, learn; more compelx, undefined visualizations, used in working sessions for brain storming
exploratory and data-driven (quantitative)
goal is to spot trends, make sense, and deep analysis; make more complex, dynamic and interative visualizations— used in working sessions and testing.
to show qualitative data use:
comparisons: bar charts, pie charts, tree maps; for geographic use symbol maps, and test data use word clouds.
to show quantitive data use:
trend over time: line chart, outlier detection: box and whiskers, relationship between two variables: scatter plots and filled maps for geographical.
a stacking graph
reveals the real increase and almost always easier to interpret than a pie
you can improve your charts by:
appropriate scales and using colors effectively
colorblind friendly colors:
red and blue
IMPACT Model
explain what was being researched and what the purpose of the project is
M: if appropriate, describe issues you encountered in the ETL process
P& A: an overview of your model and the limitations you faced
C: explanation of the visual you chose and what/if something stands out
T: discuss what’s next in your analysis. how frequently will you update? trends or outliers we need to pay attention to?
Consider audience by:
Placing the focus on them
Craft different versions for different audience
Use appropriate tone
provide the right tone
avoid TOO much yap
10 tips for effective BUZ WRITING
know ur audience
know ur message
think like a reporter
banish buzzwords and cliches
junk the jargon
keep it tight
make it plain and simple
leave the symbols and abbreviations
get active
proofread!!
financial statement audit?
It is an objective examination and evaluation of the financial statements to make sure that the financial records are a fair and accurate representation of the transactions they claim to represent.
Other auditor jobs and beyond
internal auditor, compliance auditor, government auditor (auditor experiences can lead to forensics, consulting, and controller/CFO opportunities)
nature, extent, timing
N: why we perform audit
E: how much can we test
T: how often the procedure should be run
What does AICPA audit data standards provide?
a general overview of the basic data auditors will evaluate, including notable tables and fields.
Descriptive analytics
summarize activity or master data on specific attributes
diagnostic analytics
look for correlations or patterns of interest
predictive analytics
help auditors discover hidden patterns linked to abnormal behavior
prescriptive analytics
make recommendations based on past data
where can you find common data analytics procedures?
CAATS— computer assisted auditing techniques
who do auditors collaborate with after evaluating the evidence?
with management to resolve those issues
Communication insights
results may appear in an audit dashboard and may be included in audit evidence
Track outcomes
evaluate detection and resolution of expectations. Periodically evaluate the procedures for effectiveness
Descriptive Analytics examples:
age analysis (group balances by data), sorting (identifies largest or smallest values), summary statistics (mean, median, min, mix, count, sum), samplin (random & monetary unit)
descriptive analytics audit procedure example
analysis of new accounts opened and sales employeee bonsues by employee and locations.
what does age analysis determine
the likelihood of payment
how should you sort your values to provide meaningful insight
smallest to largest
random sampling is useful for what
manual evaluation of source documents
what does summary statistics show you?
relative size of a value to its population (mean, median, min, max, count and sum)
What does monetary unit sampling target?
larger transactions such as cumulative balances
how do z scores identify outliers?
by calculating stnd distance from the mean (bw 1 and 3)
what does benfords law identify?
abnormal distributions of large numbers
what do pivot tables do?
identify individual employee avgs
what does exact and fuzzy matching allow?
it allows you to join tables on complete or partial values on at least one common attribute
inner join?
shows only the records from both tables that match
left join?
shows only the records from the 1st table and only records that match
right join?
shows only records from the 2nd table and the ones that match
Outer join?
shows all non matching records
what are sequence checks used for?
locating gaps or duplicate transcations
Regression?
predicts specific dependent values based on independent variable inputs
Classification?
predicts a category for a record
probability
uses a rank score to evaluate the strength of classification
sentiment analysis
evaluates text for + or - sentiments to predict outcomes
what if analysis
decision support systems
applied stats?
predicts a specific outcome or class
AI
uses observations of past actions to predict future actions for similar event
audit procedure for prescriptive analysis example
analysis determines procedures to follow when next accounts are opened for inactive customers such as requiring approval
probabilistic models
judge things like likehood and probability
what does regression tell an audiotor?
allows an auditor to predict a specific dependent value based on independent varibale inputs.
what does classifiction on auditing focus on?
risk assesment can be either low or high risk
what is imp to an auditor when it comes to classification?
the strength of the class
sentiment analysis
enables evalution of test for distributions of words that maybe classified as + or - outcomes to look for potential bias.
AI models expected behavior is evaluated by?
taking past actions from auditors to predict the expected behavior in an unknown case
financial statement analysis?
evaluate a company's financial statements and financial performance
what do we use to analyze financial statements?
ratio analysis
what should we do before we compare ratios
common size
liquidity ratio
ability to satisfy company’s ST obligations
activity ratio
are computation of a firms operating efficiency
solvency ratio aka financing ratio
helps assess a company’s ability to pay its debts and stay in business
profitability ratio
provide info on the profitbability of a compnay and its pospects for the future
DuPoint Ratio
components of ROE
diagnostic analytics
useful when you can make a comparison of ratios
horizontal analysis
example of predicitive analytics and can be used to calculate rends from 1 period to the next over time
change percent
(current year amount-base year amount)/base year amount
change amount
current year amount-base year amount
what does an index show?
a change in a given year comapred to a common base year
what types of graphs can show trends, proportions and makeup of financial stments?
sparklines, heatmaps and sunburst
what does test mining analyze?
the freuqency of words in unstructured data and matches those to sentiment dictionary
can analysts track sentiment proptioton over time?
yes, they can and it will help them realize gains in the market (postive, negative, uncertain, litigious/mediate, modal/possible, and contraining/commit)
the proportion of a class of words can be useful in predicting investment returns. whats the study?
the higher the proportion of negetive words, the lower the retuens
how can we access the data we need efficiently?
XBRL (eXtensible Business Reporting Language) is a type of XML (extensible markup language) used for organizing and defining financial elements
what do tags help data do?
allows data to be quickly transmitted and recieved, and serves as an input for analytics models ysed by financial analysts, auditors, or regulators
why is each data element tagged
to identify what they are and context in an instnace document
steps of accessing the data
1) taxonomy
2) extensioin schema
3) financial statements
4) XBRL instance document
5) validate document
managers rely on a combination of these analytics:
descriptive to compute the results of an initiative, diagnostic to compare those results to a benchmark (ex. budget), predictive to plan for future periods, and prescriptive to guide the controlling process
what are performace metrics?
they are numbers used to evaluate and measure performance in a company including KPIs
descriptive KPI
what happened/is happening...you are not comparing them
diagnostic KPI
why did it happen? can we explain why it happened?
Prediticitve KPI
will it happen in the future? is it foreseeable? what is the probability something will happen?
(use past data and predict the future)(regression)
prescriptive KPI
what should we do based on what we expect will happen? how do we optimize our performance based on potential constraints?
(where do we go from here and what would be the impact in the future and set up a goal using goal seek analysis)
variance analysis
compares actual results to budgeted results to determine whether a variance is fav or unfav
what do bullet charts tell us?
they help identify the root causes of the variance (ex. the price we pay for RM or the inc. volume of sales) and drill-down to determine the good performance to replicate and the poor performance to eliminate