Sam, the manager leading the audit of Freedom, a firework manufacturer, wants to utilize audit data analytics (ADA) as a substantive test for the valuation of accounts payable. During the test of controls, although the IT system as a whole had weak controls pertaining to appropriate access, it was noted that there were strong internal controls pertaining to accounts payable and cash disbursements. Should Sam rely on ADA for substantive testing for the valuation of accounts payable? Sam should not rely on ADA for substantive testing for the valuation of accounts payable. As IT access controls are weak, the underlying data for all accounts and assertions has high control risk. Therefore, Freedom's auditors will utilize substantive tests of detail throughout their audit procedures. Sam should not rely on ADA for substantive testing for the valuation of accounts payable. Regardless of a company's internal control design and implementation, because of the high inherent risk associated with cash, ADA should not be used as part of the substantive testing procedures for cash disbursements. Sam could rely on ADA for substantive testing for the valuation of accounts payable. Although IT access controls are weak, the strong controls surrounding accounts payable and cash disbursements overcome this when addressing assertions pertaining to accounts payable. None of these answer choices are correct. QUESTION 4 Cassidy and Chad are discussing the use of audit data analytics for an upcoming audit of one of their major attestation clients. The pair is considering the use of this technique to improve the efficiency and effectiveness of the audit. Cassidy asks Chad to detail any important considerations he sees in using this technique. Which of the following responses by Chad would be most appropriate in this situation? One of the key considerations in using an audit data analytics technique will be ensuring that we work closely with the client's management. Once misstatements are identified, they will need to provide written confirmations that the identified misstatements have been corrected, in order to justify a clean audit opinion. One of the most important considerations in utilizing an audit data analytics technique will be making sure that the selected population of data contains misstatements. This way, we can see if the system flags the misstatements. One of the key considerations we should be thinking about is how we can adjust the cost of the audit to recoup the expenditures on an audit data analytics system. That way, we can ensure the system pays for itself in as short a time as possible. A consideration that is central to the use of audit data analytics will be ensuring that the data we input into the system for analysis is cleaned appropriately. If we enter bad data, we may get bad results. QUESTION 6 Brooklyn, an experienced auditor from the audit firm Liberty, noted a high risk of employee fraud schemes pertaining to cash disbursements at Dewey Doggy, a large-scale hotdog stand. Which of the following audit data analytic (ADA) techniques could best be used to test for fraudulent employee cash disbursements? Brooklyn could use a visualization to search for fraudulent employee cash disbursements. Brooklyn could use ADA to create a bar graph that could depict cash disbursements by day of the week. Using this information, Brooklyn could identify which, if any days had cash disbursements incorrectly directed to employees. ADA techniques would not be able to assist in testing for fraudulent employee cash disbursements. Brooklyn will need to find another tool to assist in gathering evidence. Brooklyn could use a matching analysis to search for fraudulent employee cash disbursements. Brooklyn could request the listing of bank accounts and routing numbers that are used fo employee payroll. Brooklyn could use ADA to search for matches of bank account and routing numbers to those that are used for other cash disbursements. Any overlapping information could be further investigated for potential fraud. Brooklyn could use a cluster analysis to search for fraudulent employee cash disbursements. Brooklyn could use ADA to gather information regarding what time of day cash disbursements are processed. Using this information Brooklyn could identify which, if any, times of day had cash disbursements incorrectly directed to employees
