AUDIT ANALYTICS AUDIT

ESSAY 5: DATA ANALYTICS FOR FINANCIAL STATEMENT AUDITS
Figure 5-7: Cumulative Frequency Distributions for Various
Ratios—continued
Multivariate Ratio Analysis
The charts in figure 5-7 allow individual ratios to be benchmarked. While
such a piecemeal technique has value, it may fail to identify relationships
exhibited via the combination or synthesis of all examined ratios. Because
outliers in univariate space are often not found to be multivariate outliers
(Starkweather 2013), if one is looking for true outliers, it may be useful to
benchmark several key ratios simultaneously. Thus, instead of reviewing
Ratio 1 , Ratio 2 , ..., and Ratio n , separately, one might consider the n-tuple
(Ratio 1 , Ratio 2 , ..., Ratio n ) as a point in multidimensional space to be
compared with the industry benchmark point of median ratios.
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