AUDIT ANALYTICS AUDIT

ESSAY 5: DATA ANALYTICS FOR FINANCIAL STATEMENT AUDITS
Figure 5-5 is a scatter plot of sales against number of employees, a
different type of chart from the dot plots depicted, which all have
horizontal category (store ID) rather than value axes. When the data are
broken out as two series depending on whether or not the store sells gas
there is a strong correlation, approximately 80 percent in each case, and it
is clear that stores selling gas have significantly higher sales per
employee than those not selling gas. If the data were not broken out into
two series, the regression line would not be a good fit and the correlation
would be only 15 percent. It would be inappropriate for the auditor to
develop a single regression model for the data as a whole without
allowing for the difference between the two sets of stores. This serves to
make the point that auditors should use DA to understand the data
before attempting to model it.
Figure 5-5: On the Go Stores, Scatterplot of Sales Versus Average
Number of Employees
Correlation between Sales and Number of Employees
Source: Compustat 2013
The conclusions and insights that the auditor of On the Go Stores would
draw from this DA would depend on the specifics of the entity, including
the auditor’s expectations. The visualizations help the auditor see
patterns and relationships and possibly unexpected results. It is up to the
auditor to decide, based on other knowledge of the business, what is
important and what, if anything, requires additional audit focus.
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