ACCY 501 EXAM #2 CHAPTER 11 QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026
What is data analytics? - Answers The process of gathering and analyzing data and then using the
results to make better decisions
What are the attributes of the current data environment? - Answers Volume
Velocity
Variety
Veracity
Steps to Internal Audit Data Analysis - Answers 1. Define the question you want to answer
2. Obtain the data
3. Clean and normalize the data
4. Analyze the data
5. Communicate the results
4 Common ways that data analytics are used in internal audit - Answers Compliance
Fraud detection and investigation
Operational Performance
Internal Controls
4 Types of Data Analytics - Answers Descriptive
Diagnostic
Predictive
Prescriptive
Audit Sampling - Answers The application of an audit procedure to less than 100% of the items in a
population for the purpose of drawing an inference about an entire population
Two general approaches to sampling - Answers Statistical
Non statistical
Sampling Risk - Answers the risk that the internal auditor's conclusion based on testing items in a
sample may be different than the conclusion reached if the audit procedure was applied to all items in
the population
Non Sampling Risk - Answers occurs when an internal auditor fails to perform his or her work
correctly
Risk of over-reliance - Answers -Risk of assessing control risk too low
-auditor thinks that the control works based on the sample, but it really does not
-auditor thinks the control is more effective than it really is
-lose effectiveness
Risk of under reliance - Answers -Risk of assessing control risk too high
-auditor thinks that the control does not work based on the sample, but it really does
-auditor thinks the control is less effective than it really is
- lose efficiency
Control Risk - Answers risk that controls fail to reduce the controllable risk to an acceptable level
Controllable risk - Answers portion of inherent risk that is reduced through day-to-day operations
Residual Risk - Answers Risk remaining after controls have been implemented
Attribute Sampling - Answers test of the rate of deviation for a certain control to determine whether
the occurence rate is acceptable (whether the control works or not)
Stratified Attribute Sampling - Answers variation of attribute sampling from a population that can be
subdivided
(ex. dividing a population of purchase transactions into those of a large amount and a small amount,
allowing the auditor to seperate them by which control applies)
Stop-and-go sampling - Answers A small sample is tested - no issues, control works; errors found,
expand to a larger population
Discovery sampling - Answers A sampling plan for locating at least 1 deviation, providing that the
deviation occurs in the population with a specified frequency.
-used when deviation rate is very low and auditor is looking for fraud
Steps in Statistical Audit Sampling in Tests of Controls - Answers 1. Identify a control objective and the
related control
2. Define a control deviation
3. Define the population and sampling unit
4. Determine the parameter values affecting the sample size
What is data analytics? - Answers The process of gathering and analyzing data and then using the
results to make better decisions
What are the attributes of the current data environment? - Answers Volume
Velocity
Variety
Veracity
Steps to Internal Audit Data Analysis - Answers 1. Define the question you want to answer
2. Obtain the data
3. Clean and normalize the data
4. Analyze the data
5. Communicate the results
4 Common ways that data analytics are used in internal audit - Answers Compliance
Fraud detection and investigation
Operational Performance
Internal Controls
4 Types of Data Analytics - Answers Descriptive
Diagnostic
Predictive
Prescriptive
Audit Sampling - Answers The application of an audit procedure to less than 100% of the items in a
population for the purpose of drawing an inference about an entire population
Two general approaches to sampling - Answers Statistical
Non statistical
Sampling Risk - Answers the risk that the internal auditor's conclusion based on testing items in a
sample may be different than the conclusion reached if the audit procedure was applied to all items in
the population
Non Sampling Risk - Answers occurs when an internal auditor fails to perform his or her work
correctly
Risk of over-reliance - Answers -Risk of assessing control risk too low
-auditor thinks that the control works based on the sample, but it really does not
-auditor thinks the control is more effective than it really is
-lose effectiveness
Risk of under reliance - Answers -Risk of assessing control risk too high
-auditor thinks that the control does not work based on the sample, but it really does
-auditor thinks the control is less effective than it really is
- lose efficiency
Control Risk - Answers risk that controls fail to reduce the controllable risk to an acceptable level
Controllable risk - Answers portion of inherent risk that is reduced through day-to-day operations
Residual Risk - Answers Risk remaining after controls have been implemented
Attribute Sampling - Answers test of the rate of deviation for a certain control to determine whether
the occurence rate is acceptable (whether the control works or not)
Stratified Attribute Sampling - Answers variation of attribute sampling from a population that can be
subdivided
(ex. dividing a population of purchase transactions into those of a large amount and a small amount,
allowing the auditor to seperate them by which control applies)
Stop-and-go sampling - Answers A small sample is tested - no issues, control works; errors found,
expand to a larger population
Discovery sampling - Answers A sampling plan for locating at least 1 deviation, providing that the
deviation occurs in the population with a specified frequency.
-used when deviation rate is very low and auditor is looking for fraud
Steps in Statistical Audit Sampling in Tests of Controls - Answers 1. Identify a control objective and the
related control
2. Define a control deviation
3. Define the population and sampling unit
4. Determine the parameter values affecting the sample size
