Solution Manual For Introduction To Data Analytics For Accounting 1st Edition Vernon Richardson Katie Terrell Ryan Teeter Download

Solution Manual for Introduction to Data Analytics for Accounting, 1st Edition, Vernon Richa
Solution Manual for Introduction to Data Analytics

for Accounting, 1st Edition, Vernon Richardson Katie
Terrell Ryan Teeter
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Richardson, Terrell, Teeter – Introduction to Data Analytics for Accounting, 1st Edition – Chapter 5
Chapter 5 End-of-Chapter Assignment and Lab Solutions

Multiple Choice Questions
1. (LO 5-5) Which type of question does predictive analytics address?
a. What happened?
b. What should we do based on what we expect will happen?
c. Why did it happen?
d. Will it happen in the future?
2. (LO 5-4) Which type of question does diagnostic analytics address?
a. What happened?
b. What should we do based on what we expect will happen?
c. Why did it happen?
d. Will it happen in the future?
3. (LO 5-2, 5-3) What type of analytics addresses questions of “what happened?”?
a. Descriptive Analytics
b. Diagnostic Analytics
c. Predictive Analytics
d. Prescriptive Analytics
4. (LO 5-2) What type of analytics would address the question of whether a company will go
bankrupt?
5. (LO 5-2) If we wanted to know what level of sales would be needed to breakeven given the
current economic environment, we would call that _____________ analytics?
a. descriptive
b. diagnostic
c. predictive
d. prescriptive
6. (LO 5-2, 5-3) What type of analytics would primarily summarize facts and compute sums,
averages, counts, etc.?
7. (LO 5-2, 5-6) What type of analytics would primarily use what-if analytics, scenario manager,
and goal seek analytics?
Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
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8. (LO 5-2, 5-4) What type of analytics would include Benford’s law to assess whether fraud had
occurred?
9. (LO 5-2, 5-5) What kind of analytics is generally used to forecast future sales, earnings and cash
flows from operating activities?
a. Time series
b. Classification
c. Regression
d. Benford’s Law
10. (LO 5-5) What kind of analytics is generally used to predict whether a company’s financial
statements are fraudulent?
a. Time series
b. Classification
c. Regression
d. Horizontal Analytics
11. (LO 5-2, 5-6) Which tool is generally associated with prescriptive analytics?
a. What-if scenario
b. Fuzzy matching
c. Pivottables
d. Means, modes, medians and counts
12. (LO 5-7) Which statistic tells us how many standard deviations (σ), a data point (or observation),
xi, is from its population mean, μ?
a. z-score
b. normal distribution
c. uniform distribution
d. F-statistic
13. (LO 5-7) Which distribution is a probability distribution where all outcomes are equally likely?
a. Normal distribution
b. Poisson distribution
c. Level distribution
d. Uniform distribution
14. (LO 5-7) If p-value <= alpha threshold, you should
a. Reject the null hypothesis (i.e. significant result)
b. Fail to reject the null hypothesis (i.e. not significant result).
15. (LO 5-7) If we run a regression where y is the College Completion Rate = f(factors
potentially predicting college completion rate), what is the dependent variable?
Education.
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a. Factors potentially predicting college completion rate

b. College completion rate
c. Cannot be determined
16. (LO 5-7) A _________ t-test has more power than a ___________ t-test.
a. one-tailed; two-tailed
b. two-tailed; two-tailed
17. (LO 5-7) If the critical value for a one-tailed t-test at the α=0.05 level is 1.645, the t-statistic
needed to reject the null hypothesis of no difference would be __________:
a. greater than 1.645
b. less than 1.645
Discussion Questions
1. (LO2) Analysis works to address the data analytics question. Different questions lead to
different types of analysis, be it descriptive, diagnostic, predictive or prescriptive analytics.
Descriptive analytics: What happened? What is happening?
Diagnostic analytics: Why did it happen? What are the reasons for past results? Can we
explain why it happened?
Predictive analytics: Will it happen in the future? What is the probability something will
happen? Is it forecastable?
Prescriptive analytics: What should we do, based on what we expect will happen? How do
we optimize our performance based on potential constraints?
2. (LO2, LO3, LO6) Descriptive analytics is backward looking, reporting on what happened. In
contrast, prescriptive analytics looks prospectively and describes what we should do, based
on a prediction of what will happen in the future.
3. (LO2) Before an analyst can understand why something happened, it is necessary to know
what happened and what needs further explanation.
4. (LO2, LO3) Descriptive analytics addresses the question of how much state taxes the
company paid during the previous year.
5. (LO2, LO3) Descriptive analytics emphasizes totals, sums, averages and sum totals. These
are the tools needed to explain what happened.
6. (LO2, LO5) Predictive analytics are used to forecast future earnings or sales, since it
addresses the questions, “Will it happen in the future?” or “What will happen in the
future?”. In this case, times series analytics may be used to help with the prediction.
7. (LO2, LO6) Prescriptive analytics is used to optimize the company’s decisions and responses
based on it expects will happen. It addresses the question, “What should we do based on
what we expect happen. Which type of analytics would optimize firm analytics based on
expected changes in tax law? Defend your choice.
8. (LO2, LO4) Diagnostic analytics would look for violations of internal company policies since it
looks for outliers and anomalies. The expectation would be no violations of internal
company policies; diagnostic analytics looks for exceptions, outliers and anomalies.
9. (LO7) The null hypothesis would suggest that holiday sales returns are not different from
non-holiday sales returns. The alternative hypothesis would be that holiday sales returns
are different from non-holiday sales returns.
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Brief Exercises
1. (LO2, LO3, LO4, LO5, LO6) Match the analytics type (descriptive, diagnostic, predictive
and prescriptive) to its example questions.
Type of Analytics Example Questions
Predictive Analytics Can we forecast future revenues/cash

flows/earnings with reasonable accuracy?
Prescriptive Analytics Should the company make its products or
outsource to other producers?
Descriptive Analytics How much did we pay in federal taxes last year?
Diagnostic Analytics How can the computation of price variance and

labor rate variance help determine root cause of
the operational results?
Prescriptive Analytics Will the company be profitable if their

pharmaceutical product is approved by the FDA?
Descriptive Analytics How big is the difference between taxable income

and net income?
and prescriptive) to its analytics tools used.
Type of Analytics Analytics Tools Used
Descriptive Analytics Counts, Totals, Sums, Minimums, Maximums
Diagnostic Analytics Identify Anomalies/Outliers
Predictive Analytics Forecast using Time Series Analytics
Prescriptive Analytics Goal-seek, Sensitivity Analytics
Predictive Analytics Classification
Diagnostic Analytics Benford’s law, Sequence Checks, Duplicate

Identification
and prescriptive) to the analytics types used.
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Type of Analytics Types of Analyses Used
Descriptive Analytics Ratio Analytics
Diagnostic Analytics Bank Reconciliation
Prescriptive Analytics Scenario Analytics
Descriptive Analytics PivotTable Analysis to find most profitable

product or customer
Predictive Analytics Classifying firms into those expected to have

committed fraud vs. no fraud
Diagnostic Analytics Fuzzy Matching of Vendors and Employees to

see if there are similarities in names or
addresses
Prescriptive Analytics Capital Budgeting – evaluating cash flows
Diagnostic Analytics Variance Analytics – Why Price or Quantity

Used is Greater Than Expected
4. (LO2, LO3, LO4, LO5, LO6) Match the type of data analytics statistical function used in
Excel’s Data Analysis Toolpak to its function.
Data Analytics Statistical Function Function of Tool
Correlation To understand if and the extent to which

variables are related to each other
Regression To understand the relation between specific

dependent variable values and independent
variable inputs
Descriptive Statistics To understand the basic statistics, including

the mean, standard deviation, minimums and
maximums of a data set
Histogram To understand the frequency of the data using

a display of rectangles with area proportional to
the underlying frequency of the data
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T-tests To understand the probability of a difference

in means between either two independent
samples or a paired sample through time
Problems
1. Answers will vary based on year accessed.
c. To compare a company’s ROA to the industry (or population), a t-test could be run to
compare and assess if there is a statistical difference.
2. If the t-test comparing one company’s ROA to the industry average ROA is 0.045 and the threshold is
0.05, we would reject the null hypothesis that the company’s ROA is the same as the industry and
conclude that the industry’s ROA is different from the industry average.
If the t-test comparing one company’s ROA to the industry average ROA is 0.11 and the threshold is
0.10, we would not reject the null hypothesis that the company’s ROA is the same as the industry and
not conclude that the industry’s ROA is different from the industry average.
3. If your IQ is 130 and the average population IQ is 100 and the standard deviation is 15, what is your z-
score? The z-score would be computed as (130-100)/15 = 2, or two standard deviations above the
mean. We would reject the null hypothesis that your IQ is the same as the population.
An IQ of 65, with the average population IQ is 100 and the standard deviation is 15, the z-score would be
computed as (65-100)/15 = -2.33 or 2.33 standard deviations below the population. We would reject the
null hypothesis that your IQ is the same as the population.
The 95 percent confidence interval would mean ± 2 standard deviations. So, in this case it would be 100
± 2 (15), would give us a confidence interval between 70 and 130.
4.
Accounting Data Audit Potential Analytics Tools

Analysis Type/
Question Types
Descriptive/ What How long have the existing accounts Crosstabulation/Pivottable,
happened? What is receivable been outstanding (i.e., aging average
happening? of accounting receivable)?
What is the average length of time to
collect accounts receivable?
What controls failed?
Diagnostic/ Why did Why did the collectability of receivables Correlation,
it happen? What are fall in the current quarter (as compared Crosstabulation/Pivottable,
the reasons for past to the past)?
results? Can we
Education.
5-6
explain why it Which large transactions were approved

happened? by management and others not
approved by management and why?
Predictive / Will it Can we predict when financial Regression, Classification, Time
happen in the statements might be misstated? Series Analytics
future? What is the
probability
something will
happen? Is it
forecastable?
Prescriptive / What How will audit work change if the Goal-seek, sensitivity analytics,
should we do based company acquires a Korean company? What-if Scenarios
on what we expect If we have all 12/31 year-end audit
will happen? How clients, how will we organize our audit
do we optimize our work in the new year?
performance based Should we accept this company as an
on potential audit client or should we pass this time?
constraints?
5.
Accounting Tax Potential Analytics Tools
Data
Analytics
Type/
Question
Types
Descriptive/ How much did we pay in federal Count, Average,
What taxes last year? Crosstabulation/Pivottable
happened? What is the effective tax rate
What is paid?
happening? How big is the difference between
taxable income and net income?
Diagnostic/ Why did the average effective tax Crosstabulation/Pivottable,
Why did it rate change?
happen? Why did overall income tax
What are the increase even though net income
reasons for did not?
past results? Why is the difference between
Can we taxable income and net income
explain why it getting bigger?
happened?
Predictive / Can the IRS find those evading Regression, Classification, Time
Will it taxes using predictive techniques? Series Analytics
happen in the Can the company predict whether
future? What the IRS will audit them or not?
Education.
5-7
is the
probability
something
will happen?
Is it
forecastable?
Prescriptive / Should the company move Goal-seek, sensitivity analytics,
What should operations to Ireland to minimize What-if Scenarios
we do based taxes?
on what we How will our taxes change if
expect will certain tax laws change in the next
happen? U.S. Congress legislative section?
How do we (Covered in Lab 9-9)
optimize our
performance
based on
potential
constraints?
Lab 5-1 Solution

Lab 5-1 Submission 1 Screenshot: Take a screenshot of your summary statistics of total assets
and label it “Lab 5-1 Submission 1.jpg”.
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Lab 5-1 Submission 2 Screenshot: Take a screenshot of your ROA histogram and label it “Lab 5-
1 Submission 2.jpg”.
Lab 5-1 Multiple Choice Questions
1. What is the standard deviation of total assets?

a. 26,733
b. 38.785
c. 6.001
d. 204,515
2. In this lab, what is used in Excel to compute summary statistics?
a. Data Analysis Toolpak – Descriptive Statistics
b. Data Analysis Toolpak – Summary Statistics
c. Excel Computation functions
d. Excel Descriptive Statistic functions
3. What is the minimum total assets in the retail industry in 2018?
a. 6.998
b. 204,522
c. 161
d. 1,413.613
4. What is the number of observations in Lab 5-1 dataset?
a. 161
b. 162
Education.
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c. 163
d. 160
5. What are the (Standard Industrial Codes) SIC codes for the retail industry? (Hint:
Consult the Data Dictionary for Lab 5-1.)
a. 5200-5999
b. 6200-5999
c. 5400-5999
d. 5500-6199
Lab 5-1 Alt Submission 1 Screenshot: Take a screenshot of your descriptive statistics of total
income (loss) and sales (net) and label it “Lab 5-1 Alt Submission 1.jpg”.
Lab 5-1 Alt Submission 2 Screenshot: Take a screenshot of your ROS histogram and label it “Lab
5-1 Alt Submission 2.jpg”, noting the possibility of an outlier.
Education.
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Lab 5-1 Alt Multiple Choice Questions
1. What is the mean Net Income for 2018 for the retail industry ($ millions)?
a. 544.346
b. 15,379.43
c. 2,106.87
d. 8,695.32
2. What is the mean Sales (net) for 2018 for the retail industry ($ millions)?
a. 15,379.43
b. 544.346
c. 2,106.87
d. 8,695.32
3. Which is more likely to be negative? Sales (net) or net income?
a. Net Income
b. Sales (net)
4. Which observation is the outlier for return on sales?
a. -21.93
b. -0.07
c. 0.29
d. -0.10
5. What is the maximum net income achieved in 2018 for the retail industry ($ millions)?
a. 10,073
b. 9,667
c. 496,785
Education.
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d. 204,522
Lab 5-2 Solution

Lab 5-2 Submission Screenshot: Take a screenshot of your final bank reconciliation and label it
“Lab 5-2 Submission.jpg”.
Education.
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Lab 5-2 Multiple Choice Questions
1. Check 1767 is highlighted as a reconciling item both in the general ledger column and in
the bank column but for different amounts. The difference is an example of a(n)
______________.
a. error
b. outstanding check
c. outstanding deposit
d. note receivable
2. ___________ applies a format (or a highlight) to cells differently depending on the
content of the individual cells, according to rules set up by the user.
a. Conditional formatting
b. Formatting
c. Highlighting
d. Conditional highlighting
3. Since check 1771 is highlighted in blue in the general ledger column, it would be an
example of a(n) _______________.
a. outstanding check
b. outstanding deposit
c. bank fee
d. NSF check
4. When performing bank reconciliations using conditional formatting, it is important to
apply the formatting to which of the following?
a. Unique items
b. Duplicate items
5. An example of a cell highlighted in the bank column of a cash reconciliation would be
which of the following?
a. NSF check
c. outstanding deposit
d. a and c above
Lab 5-2 Alt Submission Screenshot: Take a screenshot of your final bank reconciliation and
label it “Lab 5-2 Alt Submission.jpg”.
Education.
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Lab 5-2 Alt Multiple Choice Questions
1. Check 724 would be an example of a(n) ______________ .

a. outstanding check
b. outstanding deposit
c. bank fee
d. NSF check
Education.
5-14
Solution Manual for Introduction to Data Analytics for Accounting, 1st Edition, Vernon Richa
2. The conditional formatting rule we set up highlights __________ values but not
__________ values.
a. Unique; duplicate
b. Unique; unusual
c. Duplicate; unique
d. Duplicate; unusual
3. Deposit 232 would be an example of an ___________________.
a. outstanding deposit
c. bank fee
d. NSF check
4. The $11.05 in interest earned still needs to be recorded by the:
a. company in the general ledger
b. bank in their transaction log
5. Deposit 225 ___________ as an exception, because it _________ appear in both
columns.
a. is not shown; does
b. is shown; does
c. is shown; does not
d. is not shown; does not
Education.
5-15
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Chapter 5 End-of-Chapter Assignment and Lab Solutions

a. Factors potentially predicting college completion rate

Predictive Analytics Can we forecast future revenues/cash

Diagnostic Analytics How can the computation of price variance and

Prescriptive Analytics Will the company be profitable if their

Descriptive Analytics How big is the difference between taxable income

Descriptive Analytics Counts, Totals, Sums, Minimums, Maximums

Diagnostic Analytics Identify Anomalies/Outliers

Predictive Analytics Forecast using Time Series Analytics

Prescriptive Analytics Goal-seek, Sensitivity Analytics

Predictive Analytics Classification

Diagnostic Analytics Benford’s law, Sequence Checks, Duplicate

Type of Analytics Types of Analyses Used

Descriptive Analytics Ratio Analytics

Diagnostic Analytics Bank Reconciliation

Prescriptive Analytics Scenario Analytics

Descriptive Analytics PivotTable Analysis to find most profitable

Predictive Analytics Classifying firms into those expected to have

Diagnostic Analytics Fuzzy Matching of Vendors and Employees to

Prescriptive Analytics Capital Budgeting – evaluating cash flows

Diagnostic Analytics Variance Analytics – Why Price or Quantity

Correlation To understand if and the extent to which

Regression To understand the relation between specific

Descriptive Statistics To understand the basic statistics, including

Histogram To understand the frequency of the data using

T-tests To understand the probability of a difference

Accounting Data Audit Potential Analytics Tools

explain why it Which large transactions were approved

Lab 5-1 Solution

Lab 5-1 Multiple Choice Questions

1. What is the standard deviation of total assets?

Lab 5-1 Alt Multiple Choice Questions

Lab 5-2 Solution

Lab 5-2 Multiple Choice Questions

Lab 5-2 Alt Multiple Choice Questions

1. Check 724 would be an example of a(n) ______________ .

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