Professor Adams' Lecture Materials

LO1-03: Describe how the AMPS model explains the steps in the Data Analytics process.

Data analytics defined

Data analytics is the process of evaluating data with the purpose of drawing conclusions to address all types of questions, including accounting questions.

The AMPS Model

Ask the question

Examples of questions that decision makers ask:

Which product is the most profitable in our center city stores?
If our variable costs change, how will that affect our breakeven point?

Succinct and specific

Succinct and specific questions are better than broad and general questions. Examples:

Bad question: How can Target grow net income?
Good question: How can Target sell more snack foods at its store in Fayetteville, Arkansas (store 359)?

Data will not speak to you unless you ask it the right questions!

Accountants are uniquely positioned to ask the right questions

Accountants have a lot of knowledge about business processes and, therefore, can help management create specific questions addressing problems, opportunities, and challenges at hand. Accountants also have a good sense of what data is available to answer questions.

Four types of questions

Master the data

After the appropriate question or questions has been formed, the accountant should then consider which data should be used. Often there is a trade-off between relevant data (data that is directly related to question being asked) and reliable data (data that is free from errors). Data integrity refers to the accuracy, validity, and consistency of data used and stored over time.

Other considerations when choosing data.

Perform the analysis

We'll learn about different types of analyses - descriptive, diagnostic, predictive, and prescriptive - that can be used to address data analytics questions. Different questions require different types of analyses. We'll also used different statistical techniques including:

Histograms and scatterplots

Regression

PivotTables

Internal rate of return and net present value

Benford's law

What-if/goal seek analytics

Share the story

Once we have performed analytics, it is important to share the story by communicating the results to decision makers.

Visualization is the representation of information as a graph, chart, or other image.
A dashboard is a graphical summary of various measures tracked by a company.

Information can be communicated in a static (no update, change, or activity displayed) or dynamic (story is communicated in a way that the analyses is updated in real time) way.

Data analysis is cyclical (we repeat the AMPS process over and over again)

Image source: Richardson et al. (2021, p. 5)

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