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Choose 3 articles to research the most popular platforms in use today. After reviewing the articles, compare and contrast the strengths and weaknesses of two of the platforms and identify commonalities. Use the articles to support your arguments. You will need to use the Gartner Magic Quadrant to find leading platforms. Just search the web for Gartner Magic Quadrant Analytics and choose two leaders or visionaries to begin your research. You may use the two articles below, along with one of your own choosing, or you can choose three sources on your own.ŢĂRANU, I. (2015). Big Data Analytics Platforms analyze from startups to traditional database players. Database Systems Journal, 6(1), 23-32. ***Article attachedChan, D. Y., & Kogan, A. (2016). Data Analytics: Introduction to Using Analytics in Auditing. Journal Of Emerging Technologies In Accounting, 13(1), 121-140. doi:10.2308/jeta-51463. ***Article attached.Please follow APA guidelines for the paper: 2 pages, double-spaced, 12-point Times New Roman font, one-inch margins. Remember to include a References page that includes all references to material used in your paper. In-text citations are also required in the body of your paper.JOURNAL OF EMERGING TECHNOLOGIES IN ACCOUNTING
Vol. 13, No. 1
Spring 2016
pp. 121–140
American Accounting Association
DOI: 10.2308/jeta-51463
Data Analytics: Introduction to Using Analytics in Auditing
David Y. Chan
St. John’s University
Alexander Kogan
Rutgers, The State University of New Jersey, Newark
ABSTRACT: This is a hands-on introductory practical data analytics teaching case that can be used in an auditing or
related course. Students will learn about data attributes, data creation, structured query language (SQL), basic
statistics, and performing basic audit procedures using analytics by utilizing the open source software R. Instructors
can use this case for an in-class discussion or an independent out-of-class assignment. A solutions guide is available
in the Teaching Notes. Multimedia files are available for download, see Appendix B.
Keywords: auditing; data analytics; R; teaching case study.
INTRODUCTION
W
e are in the era of Big Data and accounting and auditing professionals with data analytical skills are in high
demand. Accounting firms today expect graduates to have an appreciation for analytics and understand where
analytics may be used (Ernst & Young Academic Resource Center [EYARC] Colloquium on Analytics in the
Accounting Curriculum [EY 2015]). However, many accounting programs do not expose their students to data analytics in their
curricula. The AACSB issued Standard A7 that provides guidance for accounting programs including learning experiences that
develop skills and knowledge relating to data creation, data sharing, data analytics, data mining, data reporting, and data storing
in an organization (AACSB 2014). The purpose of this data analytics case is to gently introduce and familiarize students with
the use of data analytics in general and its use in the accounting and auditing contexts. Furthermore, students will learn about
data attributes, data creation, structured query language (SQL), basic statistics, and performing basic audit procedures using
analytics. The case utilizes the free open source software R (The R Foundation 2015). Instructors can use this case for an inclassroom, instructor-led discussion or an independent out-of-classroom student assignment. The case provides all the
necessary instructions from how to set up R to performing common audit-related procedures. The instructions are all inclusive
and the students will not need resources outside of this case and its related materials.
The scripts used in this case can be downloaded as a text file, see the link to ‘‘Scripts’’ in Appendix B.
Background Information
As a new staff auditor for a public accounting firm, you have been assigned to the XYZ Inc. audit engagement. XYZ is a
public company. The engagement partner has suggested the use of computer-assisted audit tools and techniques (CAATTs)
whenever possible in order to ensure that an effective and efficient audit is performed. A CAATT is computer software that
allows auditors to perform data analytics. Furthermore, CAATTs may aid the auditor in testing 100 percent of the transaction
population and automating or semi-automating the performance of audit procedures. While many audit procedures can be
performed manually or with the use of Microsoft Excel, manual methods are not always effective or efficient and the use of
spreadsheet software has data limitations. For example, Excel 2013 only allows for the 1,048,576 rows or observations and
16,384 columns or variables (Microsoft 2015). The limitation on the number of columns may not be an issue but the limitation
We acknowledge and thank Miklos A. Vasarhelyi, Hui Du, the reviewers, and participants of the 2015 AIS Educator Conference and the 2015 AAA
Annual Meeting for the insightful comments and suggestions to advance and improve our paper.
Supplemental materials can be accessed by clicking the links in Appendix B.
Editor’s note: Accepted by Miklos A. Vasarhelyi.
Submitted: March 2015
Accepted: March 2016
Published Online: April 2016
121
122
Chan and Kogan
on the number of rows may become a constraint. Furthermore, computational performance issues in Excel will result when
analyzing large datasets.
The audit manager on the engagement has assigned to you specific audit procedures to be performed within the revenue
cycle of the audit program. The audit procedures assigned include footing, re-computing, scanning, sample selection, and an
analytical procedure. There are two popular CAATTs in the audit software market: ACL and IDEA. However, the firm prefers
the use of the data analytical software R because of its open source nature and also the versatility of the analysis in the software.
The use of open source software is becoming more mainstream with many different organizations (Deloitte 2015).
Furthermore, many students are familiar with R from their statistics courses. Interfacing or communicating with R is done
through coding or scripting, unlike in Excel where there is a graphic user interface (GUI). Unlike CAATTs that utilize GUIs,
the benefit of a scripting interface is its inherent ability to document, review, and reproduce the path of analysis. Scripting
allows firms and regulators to perform reviews of the audit work. In R, users write the script and then execute the script. While
there is initially a steeper learning curve compared with GUI software, scripting software allows the auditor to reuse scripts in
subsequent analysis and therefore makes analysis more efficient.
Before proceeding with any audit procedures or analysis, you will have to install the R software on your computer. R is
compatible with Windows, Apple, and Linux computers. In this case, we will use the Windows version for demonstration
purposes. Please refer to Appendix A for detailed instructions on installing R.
Installing and Loading Packages
The R software comes with pre-installed add-on packages for basic analysis. However, R has a long-standing open source
community that develops packages for more advanced data manipulation and analysis. R has an extensive number of free
packages that are contributed by the open source community. ‘‘Free’’ does not in any way mean that the packages are inferior.
Users in the community may have created a specific feature that was not available in the basic software and wanted to share the
developed feature with the community. Some packages are developed for bleeding-edge analytics. The contribution from the
open source community and the variety of available analytics differentiates R from other analytical software. You will need to
download, install, and load two packages (‘‘sqldf’’ and ‘‘forecast’’) for the exercises in this case. You can copy and paste the
scripts from the ‘‘Scripts’’ text document (and as shown below) in the R Editor window to download and install the two
packages. A video that shows how scripts are executed in R is available for download, see Appendix B.
Script 1:
After copying and pasting the code into the R Editor window, highlight the pasted script and click and hold ‘‘Ctr’’ and then
click ‘‘R’’ on the keyboard. This will send the highlighted code into the R Console window and execute the code. Two
‘‘Question’’ dialog boxes may pop up. You should click ‘‘Yes’’ in both dialog boxes. A new window ‘‘HTTPS CRAN mirror’’
will pop up. Select the CRAN mirror closest to your area and click ‘‘OK.’’ For example, you can select USA (CA 1) if you are
located near California, United States. The software will automatically begin to download and install the two packages from the
respective selected mirror. Packages will only need to be installed once.
After installing the two packages, the ‘‘sqldf’’ and ‘‘forecast’’ packages will need to be loaded. These packages will have to be
loaded every time when the R software is started. To load the two packages, enter the following two-line script below into the R
Editor window and then highlight the two lines and click and hold ‘‘Ctr’’ and then click ‘‘R’’ on the keyboard. The scripts will
execute and the packages will be loaded into the R software. Notice the code passes on to the R Console window and executes.
Script 2:
Setting Format Output Options
R is designed for statistical analysis and occasionally the software recognizes some financial or nonfinancial values in the
exponential format ‘‘1eþ.’’ You will need to command R to utilize the fixed-point format instead of the exponential format since
it is commonly used when dealing with monetary/dollar values. The fixed-point format will output number values in the
numeric format by default. The various data attributes will be discussed in the ‘‘Data Cleaning’’ section. Enter the following
script into the R Editor window and then highlight the script and click and hold ‘‘Ctrl’’ and then click ‘‘R’’ on the keyboard.
This option command will have to be executed every time when the R software is first started.
Journal of Emerging Technologies in Accounting
Volume 13, Number 1, 2016
Data Analytics: Introduction to Using Analytics in Auditing
123
Script 3:
The R software is now set up and ready for use in this case.
Importing Data
Obtaining data is the first step in data analytics. In an audit, the client is responsible for providing the auditors with
financial data to audit. The client has provided the engagement team data from their sales journal, shipping journal, cash
journal, and customer master file. The client has also provided the aggregated revenue account balance for the last ten years.
The files are provided to the auditors in five comma-separated value (CSV) files. CSV is an open format and is commonly used
to transport data and can be easily readable by analytic software.
Use the following R Scripts below to import these five CSV files into R. The R Scripts will pull the respective CSV files from
a hosted server (also see the links to Sales1, Ship1, Cash1, Customer1, and Revenue in Appendix B). Once imported, R will store
the imported data in dataframes. Dataframes are similar to a database table or an Excel sheet. Enter the following lines of scripts
below into the R Editor window and then highlight the scripts and click and hold ‘‘Ctrl’’ and then click ‘‘R’’ on the keyboard.
Script 4:
Script Definition
Code
read.csv
‘http://davidchan.net/data/Sales1.csv;
header ¼ TRUE
sep ¼ ‘‘,’’
Definition
Reading a comma separated value ‘‘csv’’ file
File location
Variable names are included at the top of columns
Data is separated by commas
After importing the data into R, the ‘‘View’’ command can be used to open a dataframe. For example, to view the imported
‘‘Sales1’’ dataframe, enter the script shown below into the R Editor window and then highlight the script and click and hold
‘‘Ctrl’’ and then click ‘‘R’’ on the keyboard:
Script 5:
Data Diagnostics
Once the CSV data files have been imported into R, you should run some preliminary data diagnostics/checks. The purpose
of running diagnostic checks is to determine whether the files have been imported correctly and whether the data is what you
will need for performing the procedures. You can use an array of diagnostic techniques to check for the number of rows
(observations) and columns (variables), verify the variable names, and view and inspect the first six rows of data or the last six
rows of data. The diagnostic of data is important as you want to confirm that you are analyzing the data that you are expecting
to analyze.
Enter the scripts below into the R Editor window and then highlight the scripts and click and hold ‘‘Ctrl’’ and then click
‘‘R’’ on the keyboard to show the number of rows (nrow) or columns (ncol) in the ‘‘Sales1’’ dataframe:
Journal of Emerging Technologies in Accounting
Volume 13, Number 1, 2016
Chan and Kogan
124
Script 6:
Checkpoint 1
(1) How many rows are in the ‘‘Sales1’’ dataframe?
(2) How many columns are in the ‘‘Sales1’’ dataframe?
Enter and execute the script below into R to show the variable (column) names in the ‘‘Sales1’’ dataframe:
Script 7:
Checkpoint 2
(1) List the variable names in ‘‘Sales1’’ dataframe?
Enter and execute the scripts below into R to show the first six rows (head) and last six rows (tail) of the ‘‘Sales1’’
dataframe:
Script 8:
Checkpoint 3
(1) What is the third ‘‘Sales_Order_No’’ in the ‘‘Sales1’’ dataframe?
(2) What is the last ‘‘Sales_Order_No’’ in the ‘‘Sales1’’ dataframe?
Data Cleaning
The client may provide the auditors with the data needed for auditing but the data may not be in a format that is usable by
R for analysis. Data cleaning is necessary to get the data in a format that R can use and make computations from. For example,
the client may provide monetary accounting data with commas (‘‘1,500’’). Numeric data with commas are recognized as text or
as character format in R. R cannot do calculations on variables identified as character variables and thus they will need to be
converted into the numeric format. There are five basic types of data formats: (1) numeric, (2) integer, (3) character, (4) factor,
and (5) date. Below are examples of each:
Format Type
Numeric
Integer
Character
Factor
Date
Example
837223, 123.23, 2320840.98 (can have decimals)
235, 8372, 23208 (no decimals)
data, auditing, Main Street
0,1
2014-12-11
If you open ‘‘Sales1,’’ ‘‘Cash1,’’ and ‘‘Customer1’’ dataframes, then you will notice that there are not only variables that
have numeric values, but also have commas in them. Therefore, R may consider these numeric variables as either Character or
Factor variables. For subsequent analysis on these numeric variables to occur in R the commas have to be removed and the
variables have to be converted into the numeric format.
First, consider the Sales Journal Dataframe (Sales1):
R has a function called ‘‘str’’ that can be used to show the data format for each variable in a dataframe. Enter the script
below into the R Editor window and then highlight the script and click and hold ‘‘Ctrl’’ and then click ‘‘R’’ on the keyboard:
Script 9:
Notice the ‘‘Invoice_Amount’’ variable in the ‘‘Sales1’’ dataframe is categorized as a Factor type variable (Figure 1).
A numeric variable cannot have commas between the numbers. You will need to strip the commas from the numeric values
in the ‘‘Invoice_Amount’’ variable and convert the variable into a numeric variable using the following code:
Journal of Emerging Technologies in Accounting
Volume 13, Number 1, 2016
Data Analytics: Introduction to Using Analytics in Auditing
125
FIGURE 1
Sales1 Dataframe
Script 10:
Script Definition
Code
Sales1$Invoice_Amount
as.numeric
gsub
‘‘,’’, ‘‘’’
Definition
Variable ‘‘Invoice_ Amount’’ in the ‘‘Sales1’’ dataframe
Convert variable to numeric data type format
Remove comma function
Replace comma with no space
Next, let’s consider the Cash Receipts Journal Dataframe:
In the Cash Receipts dataframe, the ‘‘Invoice_Amount’’ and ‘‘Payment_Received’’ variables are both categorized as a
Character type of variables but should be Numeric variables. Again, this is due to the commas between the numbers. You will
need to strip the commas from the variables and convert the variables into Numeric variables using the follow scripts:
Script 11:
Checkpoint 4
(1) Remove the commas and convert the variables into a numeric variable for the following two variables ‘‘Customer_
Balance’’ and ‘‘Customer_Max_Credit_Amount’’ in the Customer Master File dataframe ‘‘CUS1.’’
Next, determine whether the other variables in the dataframes are categorized in the correct data type. As you recall, a
variable can be a Numeric, Integer, Character, Date, or Factor data type. If a variable is not categorized correctly, then you will
need to convert the variable into the correct type.
Enter and execute the scripts below in R to determine the data type for each of the variables in each of the respective
dataframes:
Script 12:
You will notice that the dataframe ‘‘Sales1’’ has two variables in an incorrect format; (1) ‘‘Invoice_Date,’’ and (2) ‘‘Invoice_
Description’’ (Figure 2). R is categorizing ‘‘Invoice_Date’’ and ‘‘Invoice_Description’’ as Factor variables. The ‘‘Invoice_Date’’
should be in the Date format and ‘‘Invoice_Description’’ should be in the Character format. The ‘‘Invoice_Date’’ is the invoice date
and you will need to convert the variable ‘‘Invoice_Date’’ from the Factor format to the Date format. Similarly, you will need to
convert the variable ‘‘Invoice_Description’’ from the Factor format to the Character format. The ‘‘Invoice_Description’’ variable
describes the type of sale and should be characterized in the Text or Character format. Here are the scripts to do so:
Journal of Emerging Technologies in Accounting
Volume 13, Number 1, 2016
Chan and Kogan
126
FIGURE 2
Sales1 Dataframe
Script 13:
In the Shipping dataset, you will need to convert the variable ‘‘Shipping_Number’’ to the Character format and the variable
‘‘Shipping_Date’’ to the Date format.
Script 14:
In the Customer dataset, you need to convert the variables ‘‘Customer_No’’ into the Integer format, ‘‘Customer_Name’’
into the Character format, ‘‘Customer_Address’’ into the Character format, ‘‘Customer_City’’ into the Character format,
‘‘Customer_State’’ into the Character format, ‘‘Customer_Credit_Rating’’ into the Factor format, and ‘‘Customer_Max_Credit_
Amount’’ into the Numeric format.
Script 15:
Checkpoint 5
(1) In the Cash dataset, convert the variable ‘‘Payment_Date’’ to the Date format.
Finally, you should re-examine all the dataframes and determine whether all the variables are in the correct data type before
you continue. Enter the following scripts and verify:
Script 16:
Structured Query Language
Structured Query Language (SQL) is a standard language of relational database management systems (DBMS). Auditors
can use the language to access, make queries, create new tables (dataframes), and manipulate data in a database. For the
Journal of Emerging Technologies in Accounting
Volume 13, Number 1, 2016
Data Analytics: Introduction to Using Analytics in Auditing
127
purpose of this case study and its use with R, focus on the latter three. You will need to understand how to use the SQL
SELECT Statement. This statement starts with the SELECT keyword followed by a comma-separated list of variables that will
be displayed in the results set generated by the statement. This is followed by the FROM clause, which lists the dataframes
required to construct the result set. Then, the statement may have the WHERE clause that provides the conditions the result set
satisfies. For example, you want to SELECT the variables ‘‘Invoice_No’’ and ‘‘Invoice_Amount’’ FROM the ‘‘Sales1’’
dataframe WHERE ‘‘Invoice_Amount’’ is greater than 1500. This SQL command would return back the variables ‘‘Invoice_
No’’ and ‘‘Invoice_Amount’’ where the ‘‘Invoice_Amount’’ is greater than 1500. Further examples will be articulated below.
Create New Dataframes
Prior to analyzing data, create a new dataframe by extracting the relevant variables from pre-existing dataframes. The
purpose of creating a new dataframe is two-fold; (1) you want to preserve the original data, and (2) speed up subsequent
analysis since the dataframe will be smaller and only consisting of the relevant variables.
In auditing accounting information, you need to select variables in various data types …
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