Q:

How are statistics used in accounting?

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Quick Answer

Accountants in various fields, including auditors, forensic accountants, controllers and risk accountants, use statistics to accomplish their professional duties. Accountants who conduct audits use samples that are statistically representative of a data base because it is almost impossible to collect all the data needed in a short period of time. Auditors typically use this method when conducting a reliability assessment to determine the accuracy of the data being audited.

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How are statistics used in accounting?
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Full Answer

Forensic accountants depend on statistical methods to analyze financial instruments that may be used to perpetrate financial fraud. By understanding statistical principles, forensic accountants correctly estimate whether the valuation of the risk associated with financial instruments was appropriate.

Controllers are typically in charge of all the financial operations of a company. Some of their main responsibilities are to perform cost analyses, provide financial forecasts and compile budget reports. Controllers apply their knowledge of statistics to develop the appropriate forecasts and analyses that promote the success of the company.

Risk management accountants use the statistical principles of distribution and correlation to account for risks when setting a valuation. Risk accountants also apply statistics principles to limit the range of valuation errors and to specify a premium that is appropriate for the risk associated with a particular forecast.

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