Introduction to Data

Analytics for
Accounting and Finance

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 Using Data Analytics
to Ask and Answer
Accounting and
Finance Questions
Chapter 1

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The Data Analytics Process

2. Intro to 4. Preparing
1. Data
Accounting & 3. Types of Data Data for
Analytics
Finance Data Analysis

5. Types and
6. Descriptive 7. Diagnostic 8. Predictive
Tools of Data
Analytics Analytics Analytics
Analytics

9. Prescriptive 10. Share the 11. Putting it All

Analytics Story Together

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Learning Objectives
1-1 1-3
Explain how computerization Describe how the AMPS
and data availability are model explains the steps in the
shaping the profession.
Data Analytics process.

1-2 1-4
Using Bloom’s Taxonomy, Analyze the tools/skills you
describe how the profession is will need for your profession
adapting to address the
and to perform data analytics.
changing world of data
availability.

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 The Changing
Landscape for the
Accounting and
Finance Profession
LO 1-1

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Accounting bills itself as the critical
information provider.
How can we harness data and
machines to provide better information
to decision makers?

EXHIBIT 1.1 Data Growth Since 2010

Source: IDC Global DataSphere, November 2018, p. 6, https://www.seagate .com/files/www-content/our -story/trends/files/idc-seagate -
dataage-whitepaper.pdf (accessed July 3, 2019)

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 With super computing power at affordable cost, enable
technology of machine learning and artificial intelligence
to analyse the massive data of social media, such as
Twitter and Facebook, to improve the accuracy of
forecasting the investment returns.
1.00E+04 Historical Cost of Computer Memory and Storage

1.00E+03
Flip-Flops

1.00E+02 Core
ICs on boards
1.00E+01 SIMMs
DIMMs
1.00E+00
Big Drives
1.00E-01 Floppy Drives
Memory Price ($/MB)

Small Drives
1.00E-02
Flash Memory

1.00E-03 SSD

1.00E-04

1.00E-05

1.00E-06
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Year
Source: http://www.jcmit.net/memoryprice.htm

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7
Understanding the scope of big data

 The data that now floods the Internet every second is equivalent to
the data stored on the entire Internet 20 years ago!

Source: How Much Data Do We Create Every Day? The Mind-Blowing Stats Everyone Should Read,
https://www.forbes.com/sites/bernardmarr/2018/05/21/how-much-data-do-we-create-every-day-the-mind-blowing-stats-everyone-shoul
d-read/#6ddf004d60ba
, accessed 2/8/19

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How to deal with automation
 While computers increasingly  Data analytics is one way for
collect the data, they do not accountants to develop and
have the accounting expertise exhibit this needed expertise.
needed.
 Accountants provide the
expertise that automation does
not provide.

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Why is data analytics important for
accounting and finance professionals?

 Auditor example:  Financial advisor example:

 Auditors can shift from a  Financial advisor can use big
sample-based model to data to find behavioral
employ continuous patterns in consumers and the
monitoring where larger data market. These patterns can
sets are analyzed and verified, help businesses identify
which results in less margin investment opportunities and
of error and more precise generate higher profit
recommendations. margins.

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 Adapting to the
Changing World of
Data Availability
LO 1-2

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 Bloom’s Taxonomy provides a
hierarchical view of critical thinking skills.

EXHIBIT 1.2 Bloom’s Taxonomy: Where Machines Excel and Where Accountants Must Play
Based on: Jessica Shabatura, “Using Bloom’s Taxonomy to Write Effective Learning Objectives,” Teaching Innovation & Pedagogical Support, University of Arkansas website,
https:// tips.uark.edu/using-blooms -taxonomy/ (accessed May 20, 2019).

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Higher Order Thinking Skills

 The basic academic accounting curriculum most directly addresses

to the three lowest levels of Bloom’s taxonomy (i.e., remember,
understand, and apply).
 Data analytics moves us into the higher order thinking skills of
analyze, evaluate, and ultimately, create.
 Accountants simply cannot analyze, evaluate and create if they do
not already have the basic accounting knowledge and
understanding required by the lower level skills of remembering,
understanding, and applying levels of critical thinking mastered.

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 Introduction to the
AMPS Model
LO 1-3

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The AMPS Model

1. Ask the Question

2. Master the Data
3. Perform the Analysis
4. Share the Story

EXHIBIT 1.4 The Recursive Nature of the Data Analytics Process

Using the AMPS Model

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Sample Question
(Each Potentially Answerable With
Data):
 Which product is more profitable  What is the probability that the
at 7/11 stores in Hong Kong? company we’re considering for
an investment will go bankrupt or
commit financial statement
fraud?
 Is it more profitable the produce
an item in China or in the  If our variable costs change, how
Philippines? will that affect our breakeven
point?
 How will our increasing
 How much overhead should we
employee health insurance rates
apply to each of the Android apps affect our level in sales to
that we’ve built? breakeven?

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Four Types/Themes of Questions:

 What happened? What is happening? (Descriptive Analytics)

 Why did it happen? What are the root causes of past results?
(Diagnostic Analytics)
 Will it happen in the future? What is the probability something will
happen? Is it forecastable? (Predictive Analytics)
 What should we do, based on what we expect will happen? How do
we optimize our performance based on potential constraints?
(Prescriptive Analytics)

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“Your Data Won’t
Speak Unless You Ask
It The Right Data
Analytics Questions”

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AMPS: Master the Data

 Can the data answer/address the question?

 Does the data exhibit data integrity (accurate,
valid and consistent)?
 Does the data have errors?
 Is data missing?
 Is the data biased?

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AMPS: Master the Data (continued)

 Cost of Acquiring vs. Benefit of Using the Data

 Who owns the data?
 Is the data hard to access?
 Type of Data: Categorical vs. Numerical
 What type of analysis does the data allow us to do?

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AMPS: Perform the Analysis
 A histogram or a scatterplot  An internal rate of return or
might be used to help net present value analysis
evaluate journal entries that might be used to evaluate
are excessively big or capital investments made by
excessively small (or the firm, or equity
negative) with the testing of investments made by a
internal controls. potential investor.
 Regression analysis might be  A What-If/Goal Seek analysis
used to evaluate cost behavior might be used to perform an
by segregating total costs into analysis of how changing
fixed and variable cost costs and other factors affect
components. the breakeven level for a new
product.

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AMPS: Share the Story

 What is the best way to communicate what we’ve found in our data
analysis?
 Static Visualizations
 Reports
 Graphs
 Tables
 Dynamic Visualizations
 Dashboards

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 What Tools and Skills Do
We Need?
LO 1-4

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 Tools/Skills
 Spreadsheets – Using Excel or other program as tools for analytics:
 Basic formula and functions
 References – how to connect other data in the spreadsheet
 Macros – how to automate processes that are repetitive
 PivotTables – often a very functional tool for many types of
summarizations and also serves as a way to help organize the data

 Queries – Used to access the data needed for analysis (covered

in Chapters 3 and 4).
 Using VLOOKUP in Excel to retrieve data from
different databases.
 Understand how SQL might be used to access specific data from
large datasets.

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Tools/Skills (continued)

 Scripting –Programs written to perform analytics to do repetitive tasks

(covered in Chapters 3, 4 and 8 and in advanced data analytics courses).

 Visualizations – Used to communicate data to decision

makers using Tableau, Power BI or other tools
for communication(covered in Chapter 10).

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Labs that demonstrate the AMPS
model
Lab # Lab Name
1-3 Creating a Mortgage Amortization Schedule

A Excel Tutorial (Formatting, Sorting, Filtering, and PivotTables)

B Tableau Tutorial

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Summary

 We argue that computerization and the existence of mounds of data

available, accountants and financiers will need to be adept at data
analytics.
 We present the AMPS model as the foundation for the rest of the
book, highlighting the need to ask appropriate questions that are
potentially answerable via data analyses.
 It is important to develop new capabilities (including higher order
thinking), new skills and use new tools.

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Self Introduction

 Name
 Home Town
 College & Major
 Hobby or what you like to do during your free time

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