This past Monday was my 822 midterm exam. While the class is titled, “Assurance Services,” I think a more appropriate name would be “Business Statistics.” Either way, it is certainly a phenomenal auditing class in which the professor demands a lot from students and the students learn a great deal.
The core of the exam was all of the different types of statistical analysis that can be run on accounting data to determine if there is “material misstatement”, which can hint that there is fraud (reporting deceptive #’s), larceny (taking money when recording the sale), or skimming (taking money and not recording the sale). Statistics are useful for summarizing large amount of data into a form that can be easily interpreted. In auditing, they are generally used to evaluate whether a discrepancy is large enough to investigate further, or whether it can be ignored. In addition, they can be used by managers to develop expectations about accounting numbers and then comparing these numbers to the observed data.
The analysis covered in class includes many different tests– the Change Point Test, Chai Square Goodness-of-Fit-Test, Chair Square Contingency Table Test, and T-Test. To aid in using these tests, we use z-Scores, and regression models. Each of these tests has its own specific purpose for detecting misstatement which is thoroughly covered by Professor Spires.
Overall, the exam was very comprehensive as I had planned and the result will certainly be an indicator of how much I know about auditing & statistics.