CAC 428 Big Data and Data

Analytics in Accounting
Topic 3
Data Analysis and Data Analytics
 Data Analysis
• Data analysis is the process of examining data to find
facts, relationships, patterns, insights and/or trends.
• The overall goal of data analysis is to support better
decision-making.
• Figure 1.2 shows the symbol used
to represent data analysis
 Data Analysis
A simple data analysis example
• The analysis of ice cream sales data in order to determine how
the number of ice cream cones sold is related to the daily
temperature.
• The results of such an analysis would support decisions related
to how much ice cream a store should order in relation to
weather forecast information.
• Carrying out data analysis helps establish patterns and
relationships among the data being analyzed.
 Data Analytics
Data analytics is a broader term that encompasses data
analysis.
Data analytics is a discipline that includes the
management of the complete data lifecycle, which
encompasses collecting, cleansing, organizing, storing,
analyzing, and governing data.
The term includes the development of analysis methods,
scientific techniques, and automated tools.
 Data Analytics
According to the Institute for Operations Research
and Management Science (INFORMS),
analytics represents the combination of computer
technology, management science techniques, and
statistics to solve real problems.
 Data Analytics
• In Big Data environments, data analytics has
developed methods that allow data analysis to
occur through the use of highly scalable distributed
technologies and frameworks that are capable of
analyzing large volumes of data from different
sources.
• Figure 1.3 shows the symbol
used to represent analytics.
 Big Data Analytics
• The Big Data analytics involves identifying,
procuring, preparing and analyzing large amounts
of raw, unstructured data.
• The aim is to extract meaningful information that
can serve as an input for identifying patterns,
enriching existing enterprise data and performing
large-scale searches.
 Big Data Analytics
Different kinds of organizations use data analytics differently. For
example:
• In business-oriented environments, data analytics results can lower
operational costs and facilitate strategic decision-making.
• In the scientific domain, data analytics can help identify the cause
of a phenomenon to improve the accuracy of predictions.
• In service-based environments like public sector organizations,
data analytics can help strengthen the focus on delivering high-
quality services by driving down costs.
 Big Data Analytics
Data analytics enable data-driven decision-making with
scientific backing.
This allows decisions to be based on factual data and not
simply on past experience or intuition alone.
There are four general categories of analytics that are
distinguished by the results they produce.
We consider them now.
 Categories of Data Analytics
• descriptive analytics
• diagnostic analytics
• predictive analytics
• prescriptive analytics
Categories of Data Analytics
 Categories of Data Analytics
• The different analytics types leverage different
techniques and analysis algorithms.
• This implies that there may be varying data,
storage and processing requirements to facilitate
the delivery of multiple types of analytic results
 Descriptive Analytics
• Descriptive analytics are carried out to answer
questions about past events.
• This form of analytics contextualizes data to generate
information.
• About 80% of generated analytics results are
descriptive in nature.
• Value-wise, descriptive analytics provide the least worth
and require a relatively basic skillset.
 Descriptive Analytics
• Examples of questions answered by prescriptive
analytics:
- What was the sales volume over the past 12
months?
- What is the number of support calls received as
categorized by severity and geographic location?
- What is the monthly commission earned by each
sales agent?
 Descriptive Analytics
• Descriptive analytics reports are generally static
in nature and display historical data that is
presented in the form of data grids or charts.
• Queries are executed on operational data stores
from Customer Relationship Management system
(CRM) or Enterprise Resource Planning (ERP)
system within an enterprise.
 Descriptive Analytics
Online Transaction
Processing

Customer Relationship
Management

Enterprise Resource
Planning
Descriptive Analytics and Statistics
• Descriptive analytics has two main branches: statistics and online
analytics processing (OLAP).
• OLAP is the term used for analyzing, characterizing, and summarizing
structured data stored in organizational databases (often stored in a data
warehouse or in a data mart) using cubes.
• Cubes are multidimensional data structures that are created to extract a
subset of data values to answer a specific business question).
• The OLAP branch of descriptive analytics has also been called business
intelligence.
• Statistics helps to characterize the data, either one variable at a time or
multivariable, all together using either descriptive or inferential methods.
Descriptive Statistics and Analytics
Descriptive Statistics and Analytics
• Descriptive statistics summarizes the data to provide meaningful and easily
understandable patterns from the data.
• It is very useful in data analytics and very popular among the statistical methods
• It does not allow making conclusions (or inferences) beyond the sample of the
data being analyzed.
• It is simply a nice way to characterize and describe the data on hand without
making conclusions (inferences or extrapolations).
• In business analytics, descriptive statistics allows us to understand and present
our data in a meaningful manner using aggregated numbers, data tables, or
charts/graphs.
• Descriptive statistics helps us convert our numbers and symbols into meaningful
representations for anyone to understand and use.
 Diagnostic Analytics
• Diagnostic analytics aim to determine the cause of a
phenomenon that occurred in the past
• Diagnostic analytics uses questions that focus on the
reason behind the event.
• The goal of diagnostic analytics is to determine what
information is related to the phenomenon in order to
enable answering questions that seek to determine why
something has occurred.
 Diagnostic Analytics
• Diagnostic analytics answers questions such as:
- Why were Quarter 2 sales less than Quarter 1 sales?
- Why have there been more support calls originating
from the Eastern region than from the Western
region?
- Why was there an increase in patient re-admission
rates over the past three months?
 Diagnostic Analytics
• Diagnostic analytics answers questions such as:
- Why were Quarter 2 sales less than Quarter 1 sales?
- Why have there been more support calls originating
from the Eastern region than from the Western
region?
- Why was there an increase in patient re-admission
rates over the past three months?
 Diagnostic Analytics
• Diagnostic analytics provide more value than descriptive
analytics but require a more advanced skillset (see Figure
1.4).
• Diagnostic analytics usually require collecting data from
multiple sources and storing it in a structure that lends itself
to performing drill-down and roll-up analysis (Figure 1.6).
• Diagnostic analytics results are viewed via interactive
visualization tools that enable users to identify trends and
patterns.
 Diagnostic Analytics

Online Analytical
Processing
 Predictive Analytics
• Predictive analytics are carried out to determine the outcome of an
event that might occur in the future.
• With predictive analytics, information is enhanced with meaning to
generate knowledge that conveys how that information is related.
• The strength and magnitude of the associations form the basis of
models that are used to generate future predictions based upon past
events.
• The models used for predictive analytics have implicit dependencies on
the conditions under which the past events occurred.
• If these underlying conditions change, then the models that make
predictions need to be updated.
 Predictive Analytics
• Examples of questions answered by predictive analytics
are:
- What are the chances that a customer will default on a
loan if they have missed a monthly payment?
- Is the customer likely to switch to a competitor (“churn”)?
- If a customer has purchased Products A and B, what are
the chances that they will also purchase Product C?
- what promotions the customer would respond to?
 Predictive Analytics
• Predictive analytics try to predict the outcomes of events.
• These predictions are made based on patterns, trends, and exceptions found
in historical and current data.
• Predictive analytics can lead to the identification of both risks and
opportunities.
• Predictive analytics involves the use of large datasets comprised of internal
and external data and various data analysis techniques.
• Predictive analytics provides greater value and requires a more advanced
skillset than both descriptive and diagnostic analytics.
• The tools used generally abstract underlying statistical intricacies by
providing user-friendly front-end interfaces (Figure 1.7)
 Predictive Analytics
Online Analytical
Processing
 Prescriptive Analytics
• Prescriptive analytics build upon the results of predictive
analytics by prescribing actions that should be taken.
• The focus in prescriptive analytics is not only on which
prescribed option is best to follow, but why it is the best.
• Hence, prescriptive analytics provide results that can be
reasoned about because they embed elements of
situational understanding.
• Thus, this kind of analytics can be used to gain an
advantage or mitigate a risk.
 Prescriptive Analytics
• Examples of questions answered by prescriptive analytics
are:
- Among three drugs, which one provides the best results?
- When is the best time to trade a particular stock?
- Among the CEO candidates, who will provide best value for the
investors?
• Prescriptive analytics provide more value than any
other type of analytics, require the most advanced
skillset, as well as specialized software and tools.
 Prescriptive Analytics
• Various outcomes are calculated, and the best course of
action for each outcome is suggested.
• The approach shifts from explanatory to advisory and can
include the simulation of various scenarios.
• This sort of analytics incorporates internal data with external
data.
• Internal data might include current and historical sales data,
customer information, product data, and business rules.
External data may include social media data, weather
forecasts, and government-produced demographic data.
 Prescriptive Analytics

Online Analytical
Processing

Figure 1.8 Prescriptive analytics involves the use of

business rules and internal and/or external data to
perform an in-depth analysis
 Business Intelligence (BI)
• BI enables organizations to gain insight into their performance
by analyzing data generated by business processes and
information systems.
• The results of the analysis can be used by management to
steer the business in an effort to correct detected issues or
otherwise enhance organizational performance.
• BI applies analytics to large amounts of data across the
enterprise, which has typically been consolidated into an
enterprise data warehouse to run analytical queries.
 Key Performance Indicators (KPI)
• A KPI is a metric used to gauge success within a
particular business context.
• KPIs are linked with the overall strategic goals and
objectives.
• KPIs are often used to identify performance
problems and demonstrate regulatory compliance.
• KPIs, therefore, act as quantifiable reference points
for measuring a specific aspect of a business’ overall
performance.
 Key Performance Indicators (KPI)
• The dashboard consolidates the display of multiple KPIs
and compares the actual measurements with threshold
values that define the acceptable value range of the
KPI.
• KPIs are often displayed
via a KPI dashboard.
 Big Data Analytics in Accounting
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• Is Accounting Big Data?

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• Tools that you can use in data analytics as an accountant

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 Statistical Modeling for Data Analytics
• The traditional statistical methods and underlying techniques are
regaining their attractiveness as enabling tools to support evidence-
based managerial decision making.
• This is because of the increasing popularity of business analytics.
• Statistics (statistical methods and underlying techniques) is
usually considered as part of descriptive analytics.
• Some of the statistical methods can also be considered as part of
predictive analytics, such as discriminant analysis, multiple
regression, logistic regression, and k-means clustering.