USA Practitioners (and academics): how do you use statistics in accounting?

[donrogers]

I am soon to be teaching a statistics course to masters of accounting students. I want to be able to motivate their learning of the material in relation to how they will actually use what they are learning when they begin their career or as their career progresses.

Can anyone provide me examples of when an accountant uses statistics in their job tasks (both in public accounting and private accounting; audit, tax, or elsewhere - any examples are welcomed)?

Particularly, things such as regression (linear, nonlinear, and logistic), hypothesis testing, t-tests, etc.

The more details you can provide, the better.

Thanks in advance.

Don

EDIT added: just to be sure, I've read a lot about the use of "data analytics" in accounting, but with no real examples provided. All the Big 4 have publications about it, as also does the AICPA. This is the context of what I am asking. How are data analytics being used in your experience?

 

[Steve-LevelUp]

Statistics is a valuable component during auditing. Specifically, pulling samples. Auditors pull a random sample of transactions, and review each one in incredible detail. Then, they use this sample to extrapolate the risks of error with the total data set. So, if there were 10,000 transactions, how many samples would need to be reviewed to have a 95% chance of capturing all material errors? (material = a significant amount)

https://www.nap.edu/read/1363/chapter/3

Try googling statistics in Auditing, I think this will give you a good sense. Aside from audits, statistics would be useful in financial analysis and quality control, both of which could fall to an accountant to prepare, depending on the company and job structure of the firm.

I hope this helps.

 

[donrogers]

Thank you. This had added to some ideas I'm formulating.

 

[kirby]

A very common application is option pricing using the Black-Scholes model. Used by company accountants to determine the value of company stock options. Then too the auditors need a similar statistical background to check the work of the company accountants. Use of that model requires at least a nodding acquaintance with the fundamental of statistics.

 

[bklynboy]

I use them quite a bit working on a derivatives team. We don't do the actual modeling but do need to use the logic to determine future patterns or expected impacts on the balance sheet from movements in external factors (interest rates, FX rates, inflation, etc). This is more of a financial analysis tool we use but helps to understand the cause and effect on the balance sheet.